[Olderguy]

SBA banks vs. non bank SBA lenders

A number of you have called me recently about SBA loans and their banks declining files. Many of you aren't aware of the differences betweeen bank SBA lenders and non bank SBA lenders.

Thought I'd repost an explanation here...

I'd like to highlight some differences in SBA loans and lenders. Most of you have experience with SBA banks. However you should start looking into non-bank lenders for your SBA loans. Non bank SBA lenders are more flexible in their underwriting.

Non-Bank Lenders

An SBA non-bank lender is a financial institution that does not accept customer deposits. Their sole reason for existing is to lend money to eligible small businesses in their community.

On the other hand, a bank is a financial institution that solicits monetary deposits from their customers and in turn loans these funds to other customers such as individuals and businesses seeking capital for a variety of reasons including starting or expanding a business.

Banks solicit deposits from their customers for two reasons: Number one to meet the Federal Reserve’s capital reserve requirements to ensure satisfactory liquidity levels and number two because deposited funds in a demand deposit account, or what is commonly referred to as a checking account, are the lowest cost of funds.

Government Regulation

Due to increased government regulatory oversight it is typically more difficult to qualify for a small business loan from a traditional bank than it is from an SBA non-bank lender.

Therefore, seeking capital from an SBA non-bank lender may be to your advantage due to the fact that non-bank lenders typically possess less stringent underwriting guidelines and do not require you to move your deposit relationship to them; which is time consuming and sometimes undesirable if you particularly like your depository institution.


A non bank SBA lender will allow you to collateralize business and personal assets. A SBA bank will need to collateralize commercial property.

Some examples I've seen and done. I got a guy in Hawaii $350,000 SBA 7A putting a third UCC on his primary residence for collateral as he leased his office and warehouse.

I saw a company get a $2M SBA loan collateralizing all of their $10M equipment in Brazil.

Typically a SBA bank might require 3 years management experience in buying a business where I've seen a non bank lender require only one year experience.

I have approvals require collateralize all of a clients vehicles. I was able to go back to the credit committee/underwriting and have them release the requirement for liens on the vehicles and maintain the same approval.

I have done a lot of these loans and many brokers have reached out to me with their frustration doing SBA loans. Yes you do need to do some financial analysis when reviewing the package. And it helps to have the merchant connect you with their accountant or bookkeeper for documentation needed.

Reach out if you have questions or need help.

[Ehenek]

So are you telling me NOT to trust the banks?

[Olderguy]

So are you telling me NOT to trust the banks?

Hahaha...you and I know better....

[Bcooper]

SBA banks vs. non bank SBA lenders

A number of you have called me recently about SBA loans and their banks declining files. Many of you aren't aware of the differences betweeen bank SBA lenders and non bank SBA lenders.

Thought I'd repost an explanation here...

I'd like to highlight some differences in SBA loans and lenders. Most of you have experience with SBA banks. However you should start looking into non-bank lenders for your SBA loans. Non bank SBA lenders are more flexible in their underwriting.

Non-Bank Lenders

An SBA non-bank lender is a financial institution that does not accept customer deposits. Their sole reason for existing is to lend money to eligible small businesses in their community.

On the other hand, a bank is a financial institution that solicits monetary deposits from their customers and in turn loans these funds to other customers such as individuals and businesses seeking capital for a variety of reasons including starting or expanding a business.

Banks solicit deposits from their customers for two reasons: Number one to meet the Federal Reserve’s capital reserve requirements to ensure satisfactory liquidity levels and number two because deposited funds in a demand deposit account, or what is commonly referred to as a checking account, are the lowest cost of funds.

Government Regulation

Due to increased government regulatory oversight it is typically more difficult to qualify for a small business loan from a traditional bank than it is from an SBA non-bank lender.

Therefore, seeking capital from an SBA non-bank lender may be to your advantage due to the fact that non-bank lenders typically possess less stringent underwriting guidelines and do not require you to move your deposit relationship to them; which is time consuming and sometimes undesirable if you particularly like your depository institution.


A non bank SBA lender will allow you to collateralize business and personal assets. A SBA bank will need to collateralize commercial property.

Some examples I've seen and done. I got a guy in Hawaii $350,000 SBA 7A putting a third UCC on his primary residence for collateral as he leased his office and warehouse.

I saw a company get a $2M SBA loan collateralizing all of their $10M equipment in Brazil.

Typically a SBA bank might require 3 years management experience in buying a business where I've seen a non bank lender require only one year experience.

I have approvals require collateralize all of a clients vehicles. I was able to go back to the credit committee/underwriting and have them release the requirement for liens on the vehicles and maintain the same approval.

I have done a lot of these loans and many brokers have reached out to me with their frustration doing SBA loans. Yes you do need to do some financial analysis when reviewing the package. And it helps to have the merchant connect you with their accountant or bookkeeper for documentation needed.

Reach out if you have questions or need help.

You are missing a very large segment here Steve, Investment banks that participate in the 7(a) program, While they do not directly solicit deposits from consumers but rather investors. they are licensed as banks which is their entry into sba lending as medallions for non-bank lenders are extremely difficult to come by. Investment banks like non-bank lenders tend to have far looser restrictions such as the banks my firm is partnered with not having credit requirements. They also are able to operate higher than the typical 5million cap for the 7 (a) as they will subordinate up to an additional 3 million as a private loan to a 7(a) that has been maxed out. The Sba world is extremely complex and unless you have a good guide you are missing out on several unique 7(a) derivatives.

[Olderguy]

Brandon - Wouldn't you say probably yes but they are not as visible nor as accessible to the typical broker. Post up a source or some names and contacts.

Most brokers that reach out to me don't want to be bothered by these loans due to their trouble and low commission. And they don't have the skill to do cash flow analysis, look at tax returns and pull out depreciation, officer's salaries, interest expense to improve profitability when submitting.

[Bcooper]

Brandon - Wouldn't you say probably yes but they are not as visible nor as accessible to the typical broker. Post up a source or some names and contacts.

Most brokers that reach out to me don't want to be bothered by these loans due to their trouble and low commission. And they don't have the skill to do cash flow analysis, look at tax returns and pull out depreciation, officer's salaries, interest expense to improve profitability when submitting.

Why Would I do that when I drive brokers to sign up and submit directly through me? why would I give away my secret sauce?

[Olderguy]

Why Would I do that when I drive brokers to sign up and submit directly through me? why would I give away my secret sauce?

I think you misunderstood me. I am saying brokers don't have the skillset for doing these loans in ANY way.

[mistamca]

SBA bank vs non-bank is not the issue. I don't think I have ever once cared if they were a non-bank or not. It's understanding the loans that they want in their book, the importance they place on channel sales, and how big is their sba business.

The commission also isn't low; its just slow. I don't know if you know the average cm made on an MCA because you claim to not do them but more funders than I do and I have been in the MCA space for the better part of a decade, but I can say with absolute certainty that the average deal brings in more money in SBA vs MCA. The difference is speed. I'll make 250k faster in MCA than SBA

The real problem is establishing a network that allows you to leverage volume for revenue and that is very expensive.

[Olderguy]

SBA bank vs non-bank is not the issue. I don't think I have ever once cared if they were a non-bank or not. It's understanding the loans that they want in their book, the importance they place on channel sales, and how big is their sba business.

The commission also isn't low; its just slow. I don't know if you know the average cm made on an MCA because you claim to not do them but more funders than I do and I have been in the MCA space for the better part of a decade, but I can say with absolute certainty that the average deal brings in more money in SBA vs MCA. The difference is speed. I'll make 250k faster in MCA than SBA

The real problem is establishing a network that allows you to leverage volume for revenue and that is very expensive.

The bank vs. non bank issue is that brokers call me dealing with SBA bank denials that I can usually get done with a non bank SBA lender. And you are correct, they make much more doing MCA and just decide to let me handle the SBA, equipment, personal loan side of things for their clients. Others are also calling looking for diversification to complement their MCA business. To each his own.

[Bcooper]

SBA bank vs non-bank is not the issue. I don't think I have ever once cared if they were a non-bank or not. It's understanding the loans that they want in their book, the importance they place on channel sales, and how big is their sba business.

The commission also isn't low; its just slow. I don't know if you know the average cm made on an MCA because you claim to not do them but more funders than I do and I have been in the MCA space for the better part of a decade, but I can say with absolute certainty that the average deal brings in more money in SBA vs MCA. The difference is speed. I'll make 250k faster in MCA than SBA

The real problem is establishing a network that allows you to leverage volume for revenue and that is very expensive.

I actually worked in mca for roughly 4 years before moving into middle market lending, the sba and debt restructuring are my only remaining small business programs. There is far more money in the middle market than mca.

[abfunders]

I think you misunderstood me. I am saying brokers don't have the skillset for doing these loans in ANY way.

"brokers" - Well, what are you?
Please don't insult your client base.

[Olderguy]

"brokers" - Well, what are you?
Please don't insult your client base.

Gimme a break..they call me and admit it asking for help.