SBA Lending Basics

SBA Lending shouldn’t be a daunting task that is looked down upon by lenders.  While SBA lending may require discipline, commitment and dedication, it should not be feared, rather embraced as a profitable tool to any bank.  Don’t let past experiences or other lender’s stories deter you from being part of a positive SBA experience.  Having the right people and tools in place are a crucial part of successful SBA lending.

SBA loans can be a profitable lending tool within your bank. Doing it right allows you to mitigate risk and free up capital to lend to other borrowers.

SBA Loans provide borrowers the benefit of more flexible terms, like a longer maturity and/or lower down payment.

If you are interested in SBA lending, it is important to familiarize yourself with the SBA’s Standard Operating Procedures (SOP).  There are 4 primary SOP’s that guide you through an SBA loan cycle. 

The SOP 50 10 covers Eligibility, Terms, Fees, Loan Requirements for various loans, Closing, and Funding.  It also has a special section dedicated to the SBA 504 program.  For those of us well diverse in SBA programs, we have many notes and areas marked throughout our SOP’s. This SOP has been re-written in prior years to be more user friendly to lenders. 

The SOP 50 11 covers underwriting of an SBA loan.  Although this manual is from the early years, it still provides helpful information into the underwriting world. There are some summary guides that have been given a more modern look, which makes for a bit more easy reading.

The SOP 50 50 covers servicing your SBA loans.  It give lenders guidance on how to handle various serving scenarios that may come about during the life of the loan. Though this SOP was written for SBA district offices, we are hopeful SBA will re-write this to be more user friendly for lenders in the near future.

The SOP 50 51 covers Liquidation and Workout.  This SOP too has recently been re-written to read better for lenders. It provides guidance as lenders go through the process toward a guaranty purchase request.

Each of these SOP’s are available on the SBA website in a PDF format. You can click here for direct web access to the SOP’s through SBA’s website.  

Two other tools every lender should use in the SBA lending process is the SBA Application Checklist  and the SBA Eligibility Checklist.

These two checklists are not meant to be a substitute for the information covered in the SOP 50 10.  It is important to note that these are tools to be used in conjunction with the SOP 50 10.  Please be sure to refer to the SOP’s for detailed information on specific lending scenarios. 

We understand that not all lenders have time to read through this material and keep up with changes.  If you don’t have someone on staff to do this, we are here to help.  We work only when you need us and offer our services at a fraction of having a full-time on-staff expert.