September 09, 2021

The Pros and Cons of Working with an SBA Lender

Fortunately, there are many SBA lenders out there that work with small business owners seeking additional funding. Let’s dive deeper into where you can find an SBA Preferred Lender and the pros and cons of working with one.

What is an SBA Preferred Lender?

Put simply, an SBA Preferred Lender is a bank, credit union, or other financial institution that has the authority to approve SBA loans. They’ve earned their preferred lender title from the government agency and can streamline the entire SBA lending process. Every SBA Preferred Lender has a positive, long-standing track record with the SBA and small business owners. Lenders with the Preferred status must go through the recertification process every two years to confirm their status.

The Pros Working With An SBA Lender

You can reap the following benefits if you work with an SBA lender:
  • Faster Approval and Funding: It can take a long time to get approved for an SBA loan. Since an SBA Preferred Lender has the ability to process your application in-house, you’ll likely get approved and funded much faster.
  • Greater Reliability: The SBA doesn’t give out the Preferred Lender status to everyone. Therefore, you don’t have to worry about any scams or unlawful practices with an SBA lender.
  • Less Documentation: An SBA lender will handle the underwriting process in-house, so you won’t have to submit as much paperwork as you would if you worked within a non-SBA lender.
  • Favorable Terms: If you take out an SBA loan from an SBA Preferred Lender, you’ll likely land better terms that you may not get approved for elsewhere.

The Cons of Working With An SBA Lender

The drawbacks of working with an SBA lender include:
  • May Not Be Familiar with Other Loans: SBA guaranteed loans are usually the core focus of SBA lenders. If you’re interested in an equipment loan, merchant cash advance, or a different type of financing, they may not be very helpful.
  • Longer Application: SBA Preferred Lenders will ask you to fill out an extensive application, so this may be an issue if you'd prefer a quick, online application process.
  • Credit Score Matters: Unlike some lenders with more lenient requirements, SBA Preferred Lenders will use your credit score to determine risk and interest rate. If you don’t have a good credit score, it may disqualify you from getting approved for a small business loan.
  • Collateral May Be Necessary: Depending on the business lender you choose and SBA loan you take out, you may need to put up an asset like your commercial property or vehicle to guarantee your term loan or line of credit.
  • Might Need to Create a Business Plan: Most SBA lenders will ask you for a business plan so they understand your business goals and how you plan to use the money. If you don’t have a business plan in place, you’ll have to create one in order to pursue additional working capital options.

How to Connect With an SBA Preferred Lender

To find SBA Preferred Lenders in your area, visit SBA’s Lender Match website. Once you complete a short form and describe your needs, you’ll receive an email with a list of lenders who would like to work with you. After you receive this lender list, you'll need to take the following steps:
  • Conduct research on each lender
  • Talk to lenders to determine their loan offers
  • Compare loan rates, terms, and fees
After you find the ideal loan program for your unique situation, the lender will guide you through the application process. Lender Match partners with more than 800 lenders throughout all U.S. states and territories. Keep in mind that using Lender Match, however, doesn’t guarantee you’ll get matched to lenders or get approved for an SBA loan amount. You can think of it as a tool to help you find the right lender in your community, rather than a loan application.

Conclusion: Consider the Preferred Lenders Program

An SBA Preferred Lender can make it easier and more convenient to apply for and secure an SBA loan. We encourage you to use Lender Match to find the perfect lender for your particular business, or pursue business financing options elsewhere. New call-to-action