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Work with the right lender
It’s important to understand that the SBA lending landscape is not equal.
To service small businesses more efficiently, the SBA has three categories of
lender programs – General Partner (GP), Certified Lender Partner (CLP) and
Preferred Lender Partner (PLP).
PLP status is the most desirable accreditation that an institution can
receive because it gives the lender the authority to make the final credit
decision, simplifying and expediting the loan-approval process for all parties.
Nonpreferred lenders must submit loans to the SBA for approval, a process that can take several weeks, delaying approvals and yields.
Achieving PLP status requires lenders to have in-house staff expertise and
a track record of success in the processing and servicing of SBA loans. To ensure a successful SBA loan application for your client, it’s recommended that
mortgage brokers work with an SBA lender that has PLP status.
SBA loans offer many unique opportunities for lenders and brokers alike,
but can be complex, and require significant resources and expertise. Here’s
a breakdown of the process:
■ ■ Loan application and underwriting. Applying for, structuring and
underwriting SBA loans is a multifaceted process handled by a lender,
not the SBA. The lender must determine a borrower’s eligibility, complete
a credit analysis and package paperwork, all in accordance with SBA
requirements. Brokers should work with lenders that have clear policies
on credit parameters and what defines an “acceptable” loan.
■ ■ Staffing and skill sets. To participate fully and successfully in SBA
financing, lenders and brokers must understand the market well by
investing in training and specialized staff, as well as integrating new risk
and compliance protocols to ensure they meet government requirements. Small businesses are encouraged to seek out lenders with a solid
track record of processing SBA loans. Again, this makes it critical for
brokers to work with an SBA lender, preferably one with PLP status.
■ ■ Loan servicing. Once the SBA approves a loan, lenders must administer it in accordance with federal guidelines and regulations. Complex
standard operating procedures (SOPs) govern the 7(a) and CDC/504
programs. If a lender fails to demonstrate continued ability to evaluate,
process, close, disburse, service and liquidate small-business loans, the
SBA may refuse or revoke its SBA lending status.
Real estate red flags
Even with the right SBA partner, there are several proactive steps that
mortgage brokers can take to ensure a winning SBA loan application and
bring additional value to their client relationships.
Appraisals can trip up any real estate deal. With construction costs rising
each year and the potential for material costs to change during the
approval process, financial projections can easily go awry. Work with a
good appraiser or get multiple appraisals to ensure you’re reflecting the
Another surprise that can ruin any deal is an environmental issue, such as
mold, radon or other land contaminants, as well as a failure to comply with
applicable environmental laws. Work with an environmental consultant to
identify and manage these problems before they derail your client’s property
transfer or financing transaction.
Whether a client is looking to buy an existing facility or construct a larger
facility, it’s likely they already have business debt tied up in existing assets.
Rather than increase their debt or hurt their chances of being approved for a
loan, become knowledgeable about how SBA refinancing options can consolidate existing debt. Work with your client to understand their debt and
how they can save money through refinancing.
Partnering with an SBA lender is an essential step in not only ensuring your
clients are matched with the right loan, but that the loan has the best chance
of being approved by the SBA and serviced in accordance with SBA requirements. Sending along a loan referral also can pay dividends in terms of your
client relationship and the added bonus of a nice referral fee. ■
Questions to ask before expanding
into SBA loan programs
■ ■ Does your brokerage have a full understanding of the
intricacies of the SBA lending market, so you can determine
which loan will work best for your borrowers?
■ ■ Is your team familiar with the complexities of the SBA
loan-application process and the precise requirements
needed to ensure a successful application?
■ ■ Could you act as an effective middleman to guide and
inform your clients as they proceed through the underwrit-
ing and post-closing reviews?
■ ■ Do your referral options include SBA-accredited banks that
have the skills and expert staff to service and report on
these loans in accordance with SBA guidelines
■ ■ Does your lending partner have sufficient back-office
capacity and know-how to support SBA lending
SBA loans are a valuable resource for commercial mortgage
brokers seeking to expand their base, reduce risk and offer clients
alternatives to conventional mortgages. But to participate fully
and successfully, brokers must understand the market well and
partner with an accredited SBA loan expert. If you’re considering
adding SBA loan programs to your brokerage service, consider
Shane Pierson is regional sales manager at First Bank SBA in Provo, Utah. He has more
than 10 years of experience in the banking and lending industries. He is dedicated to
helping growing businesses and providing assistance to navigate the SBA loan process.
Reach Pierson at (805) 551-7184 or email@example.com.