By Jeff Rauth. Email Here or 248 885-8797. SBA Loan Officer at a Bank That Lends Nationally. 15 Years Commercial Real Estate Experience. Past Commercial Mortgage Broker.
SBA loans were created by the government to help small businesses receive financing that would not otherwise qualify for traditional bank financing, in order to help grow and stimulate the economy. For example, most banks won’t consider start ups or under collateralized loans, unless they have the backing of the SBA.
Further, the SBA has initiatives to help groups of people (women, veterans, minorities), geographical areas (such as depressed older urban areas), and other stated missions, that statically do not receive bank financing as much as other groups (white males).
But there is a void between what the SBA’s stated missions are and what actually happens/funds on a day to day basis. Women owned businesses should not expect to receive any real special treatment or consideration. The issue is that at the end of the day, a bank or lender has to fund the loan. The SBA does not lend money; they guarantee the lender that if the borrower defaults, that the lender should receive their money back. But if the SBA deems the bank made a bad decision on funding the loan in the first place, the bank may not receive their guarantee and or suffer other fines and penalties. The bank is still on the hook…
So the borrower has to be credit worthy, per the banks underwriting standards. You’ll still have to meet the same traditional underwriting standards that any other borrower seeking SBA loans has too. And yes, there is a void between what the SBA’s PR/stated missions are and what banks will fund.
There are many loan programs that the SBA has launched that banks have completely rejected due to many reasons such as fees, bureaucratic process or that banks simply don’t like the industry in question. A classic example of this is the SBA’s car dealer floor plan loan program, which almost no banks participated in.