Business Loans
A Guide To Small Business Loans For Minorities
The Small Business Administration (SBA) helps small businesses get essential financing for growth, expansion, working capital, and debt refinancing. The SBA doesn't provide the funds-they just back up to 85% of the loan amount to lower the risk for banks and alternative lenders.
It's notoriously competitive, paperwork heavy, and painfully long to secure an SBA loan. However, small businesses are willing to invest the time and effort because these loans carry low interest rates, high borrowing amounts, and generous repayment terms. The whole process (from application to approval to funding) generally takes anywhere between 60 and 90 days.
Fortunately, there's a better way.
SBA Preferred Lenders help borrowers get SBA loans faster than they would with a common SBA lender. They've gone through great lengths and jumped through hoops to earn this Preferred Lender status from the government, and this helps streamline the entire lending process-which is a win-win for both you and the lender.
Curious how an SBA Preferred Lender can help you get much-needed funds faster? We'll tell you everything you need to know.
When you apply for an SBA loan, your lender must approve your application, and then you have to wait for approval from the SBA. Your lender's approval process is likely pretty quick and straightforward, but things slow down when your application is handed over to the SBA.
To bypass this roadblock, the SBA created a Preferred Lenders Program (PLP). This program gives lenders the final credit decision on making SBA loans, streamlining the entire process and cutting out the 4-to-6 week SBA approval process.
Not just anyone can become an SBA Preferred Lender, though. This designation only comes to lenders who process and service SBA loans efficiently for years. The SBA will also take into account the lender's processing volume, performance, and knowledge of SBA policies.
The SBA will also consider the lender's level of risk. Since the SBA is still financially backing these loans, they want to ensure lenders mitigate risk while still servicing loans to businesses in need.
Lenders who receive PLP status don't keep it forever. The term only lasts for 2 years, and then the lenders must go through a recertification process.
When it comes to finding an SBA loan, you should always look to first work with a Preferred Lender. Not only can these banks and alternative lenders streamline your funding process, but they know the ins and outs of these loans better than anyone else.
Here's why your small business should always work with an SBA Preferred Lender:
If your current lender isn't an SBA Preferred Lender, it's worth searching for a new financial institution to process your SBA loan. Even if speed isn't your main concern, these lenders will make the entire process smoother and less of a headache.
PLP and CLP lenders aren't the same thing. The Certified Lender Program (CLP) lets approved lenders service SBA-backed loans with streamlined processes. CLP lenders can use their own application forms and documentation (approved by the SBA), but the SBA gets the final word on the approval.
Since your loan application will still need to go through 2 underwriting processes, approvals aren't nearly as fast as with a PLP lender. However, a CLP lender is quicker than a non-preferred or non-certified lender, so they're still not a bad option.
Lenders can receive CLP status by building a solid track record of servicing SBA loans. If they have a positive history of successful lending and have proven they can work efficiently with their local SBA office, they can apply for the CLP designation.
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