Nowadays, many banks are staying out of the SBA loan business to avoid what they perceive to be problems with the program. Although the loans are guaranteed from default up to 90%, they have stringent caps on the maximum interest rate and fees. We’ll discuss a bit more about how, in today’s article.
Since many banks seem to make more money off fees than lending money, it is not in their interest to operate under these restrictions. However, there are still quite a few banks that do participate. It is still possible to find funding under these programs.
If you are trying to get an SBA loan, you can go about it one of two ways. If you already have a favorite bank, so you should ask them whether they participate. They may tell you they don’t, and then offer an explanation as to why they don’t. Some banks offer these programs, but they don’t like to advertise that fact.
If the loan officer recommends against it, you should ask him why he doesn’t recommend the program. You can decide for yourself whether you agree. Centering on the banks themselves, you can continue your search to compare their normal terms, conditions, and rates to those offered under the loan guarantee program.
Another option you have is to contact the Small Business Administration directly. I recommend you contact at least a few banks, first. It’s important to get a feel for how the terms compare. However, contacting the Small Business Administration about their SBA loan program really isn’t a bad idea. They will lead you back to the banks, but you’ll have more information than you had before. They also offer a large number of other resources, including training and education.