Why don’t SBA Lenders Want Small Loans?
The SBA desperately wants lenders to make more small loans – so why don’t more of them? That’s an easy answer - margin. There are shops that won’t accept applications for any deal under $350,000. The cost to process an SBA 7a Small Loan (7a loan of $350,000 or less) isn’t significant enough to make it worth the effort. There are time-saving aspects, (no life insurance, personal real estate required, expedited loan processing at the SBA among others), but not enough for most lenders to devote their staff that can spend the same amount of energy on one million dollar deal rather than three Small Loans. Some of these advantages even go away if the loan does not meet the SBA’s minimum SBSS Score.
Lenders want to do smaller deals, we have to continue to work with the SBA to make them easier and less costly to process. At 54 Financial we are encouraging lenders to let us help process these loans. We’ve tried to minimize the cost to both lenders and borrowers to make the product more palatable to both. Give us a call if you’re looking for ways to help your small need borrowers.