Best SBA Lenders for 2021
What is an SBA loan?
The SBA makes loans from private lenders more affordable and attractive by guaranteeing a significant portion of the loan amount. Since the SBA guarantee greatly reduces the risk of lenders defaulting, they are ready to make SBA loans with lower interest rates and fees, longer terms, more flexible qualification requirements and / or lower down payment requirements.
SBA loans come in different flavors, but by far the most important is the basic 7 (a) loan. It can be used as working capital; acquire land; to buy, construct, renovate or enlarge buildings; to purchase supplies, inventory or fixed assets; and even to start or buy a new business.
Other common SBA offerings are smaller loans called microloans, and larger longer-term loans called 504 loans, which are often targeted for investments in fixed assets and real estate.
What is an SBA Preferred Lender?
To offer SBA loans, a financial institution or organization must be certified as an approved SBA lender. But there is another level of lender status within the SBA program, and it has a big impact on the borrower.
Some institutions are elevated to the Preferred Lender Program (PLP). These lenders have a proven track record in processing and managing a large number of SBA loans and have demonstrated their solid understanding of effectively underwriting SBA loans. Hence, they are given the status of Preferred Lender, which allows them to make their own loan approvals in-house and get streamlined SBA approval to finalize the loan.
In contrast, standard SBA lenders must send their applications to the SBA for underwriting and approval taking up to one month for review. Since most business owners are keen to get their loans approved and funded as quickly as possible, choosing a preferred lender will provide the fastest turnaround time.
Who Should Get an SBA Loan?
Qualifying businesses that need financing should apply for an SBA loan. Eligible businesses must be incorporated for profit, doing business (or intending to do business) in the United States or its territories, demonstrate that there is reasonable equity capital to invest in the business and show that other sources of funding have been used. or attempted before seeking SBA funding.
On the other hand, some business owners shouldn’t waste their time even exploring SBA loan options. If you have bad credit, have defaulted on a government loan in the past (including a government guaranteed student loan), or have a criminal record, it is very unlikely that you will be approved for an SBA loan from whatever type. In addition, certain types of businesses are not eligible, such as those involved in gambling, illegal activities and pyramid schemes, as well as real estate investment companies, religious organizations, and non-profit organizations.
How we chose the best SBA lenders
We started our research by looking at the most active 7 (a) SBA lenders over the past year, filtering the list down to around the top three dozen based on highest amount loaned and most loans. SBA processed.
We then filtered by preferred lender status, to avoid directing readers to SBA lenders whose process would take an extra month in the SBA loan approval timeframe.
Next, we looked at the geographic range of the remaining lenders, opting for those offering nationwide loans or, alternatively, covering as many states as possible. An analysis was then conducted to compare program features, loan limits, number of financing choices available, steps involved, and (via the SBA’s annual lender activity report) what the rates were. average interest from lenders last year.
An exception to this methodology was the selection of our best lender for PPP loans. Since the PPP program is a separate program that does not follow the same structure as traditional SBA loans, the same parameters do not apply. Also, being an SBA Preferred Lender is not a relevant classification for PPP loans.