Overview of the players in the SBA lending process

Overview of the players in the SBA lending process

SBA loans are products designed by the Small Business Administration (SBA) to help promote economic development via providing small businesses and entrepreneurs with easy access to funding.

So, the first player in the process would be those who need a loan. The borrower might be an entrepreneur who is looking to start a business by purchasing a building or land to build on, renovate a current building, and/or acquire long-term equipment, or a small business owner looking to expand current operations or upgrade their current equipment. SBA loans are very attractive to small business owners and entrepreneurs because they generally offer better rates, better terms, fixed interest, and larger loan sizes than what a borrower would normally find at a traditional financial institution when applying for a business loan.

With that in mind, you would think the second player would then be a lender. For people who are not working with a Certified Development Corporation (CDC) like 504 Capital Corporation, this would generally be true. However, 504 Capital Corporation already has connections with private and public lenders and can handle every phase of the application process, making applying for an SBA loan much easier for the borrower. The CDC also supplies up to 40% of the entire loan.

Needless to say, lenders are involved, so let’s call them the third players. Lenders normally provide 50% of a project’s funding—so small business owners and entrepreneurs only need to come up with a 10% down payment—making SBA loans more attractive to the lenders because they are not assuming the full weight of the loan, and they need to do very little in the process when a CDC is handling all the paperwork. The loans are also secured by the SBA, so there is far less risk for lenders to participate.

504 Capital Corporation is a non-profit organization founded to help small business owners and entrepreneurs navigate the SBA lending process. We specialize in SBA loans and our Accredited Lenders Program (ALP) designation makes us uniquely qualified to close and service them. We can even expedite loan processing and closing to get your business moving forward more quickly.