Small Business Administration (SBA) loans are one of the most powerful tools small business owners can take advantage of, but far too many entrepreneurs do not even know these loans exist. The SBA has a long and storied history in the United States of helping entrepreneurs fuel their dreams, too much to go into right now.
However, suffice to say, the SBA exists to help small businesses get access to the capital and professional advice that he needs from those that have been in his shoes before. Of course, there are a lot of different lenders that partner with the SBA to offer these loans since the SBA is usually just guaranteeing it – promising to pay the lender back in your stead if you default. So, how can you be sure that you’re going with the right lender?
1. Do they offer the right kind of loans?
The first question to ask – before you even begin to look at the terms of the loan or anything else – is what sorts of loans are offered? The SBA has several different loan programs, so simply asking if they offer SBA loans is not sufficient. The SBA has all sorts of different loans.
Familiarizing yourself with the different types of SBA loans is a must before you even walk in the door of a financial institution. That way, you can speak credibly and competently to the lenders about your needs and what programs would best fit your business. Of course, they are happy to help you with this as well, but you want to be able to speak at their level.
2. What is their reputation?
Does the company have a good reputation with other small businesses? There are a number of places you can look to see this. Of course, Google reviews are the starting point for most people seeking to learn more about companies, and this is perfectly fine, but there are better tools as well. For instance, the Better Business Bureau provides all sorts of information about different companies and keeps a record of any complaints filed against them, assigning them a score based off of how they’ve treated their customers in the past.
Finding information like this about the different lenders you are considering is critical. Remember, the SBA simply provides the framework of the loan program and the basic terms, they are not the ones you will be dealing with each and every day.
3. Do they offer any support?
The SBA has plenty of support programs for small businesses. Everything from coaching and professional advising to help getting federal contracts, but does your lender offer anything like this? Some small business lenders have been known to help their clients with all sorts of different tools. For instance, Bank of America has all sorts of tools aimed at minority and female entrepreneurs to help them grow their businesses.
Working with lenders of different sizes will bring with it different positives and negatives. Some lenders will be big enough to offer you all kinds of support and will have very well-developed online banking and user interfaces but may be so large that you are just another number to them. Smaller lenders may not have the resources to offer all these sorts of tools but might provide a much more personal experience, something that is hard to put a dollar value to. Either way, this is a consideration that only you can decide on for your business.
4. Do they charge additional fees?
Bank fees are something everyone likes to complain about for obvious reasons. With SBA loans, typically the bank is allowed to charge 2.75% above the federal funds rate when they loan your business money. However, are there any additional fees or charges tucked into your loan that the bank has hidden in the hundreds of pages of contract? Once again, the bank’s reputation comes into play here, with some being known for transparency and others being known to stick extra fees in when you aren’t looking.
Whichever SBA loan you decide to go with – and there are a lot – just make sure that you are choosing the right lender. The difference between a lender that has your back and one that is just out for their own gain can be the difference between early retirement and working yourself into the grave. For most Americans, the largest purchase they ever make is likely to be their mortgage, but for entrepreneurs it is highly likely that your business loans will be larger than that. Whatever you do, carefully consider all your options and make sure that you and the lender are a good match!
