Call us today for a free 30 minute consultation! 940.381.6200

Welcome to the SBAadvisors Blog!

Dec.
11 th

The Top 5 Requirements to Starting or Expanding an SBA Lending Platform: #2 PLAN, part c

By |

How Much Does It Cost to Get Started and When Should We Expect to Break Even?

With any new business plan, we want to know all about the investment needed and the timeline to profitability.  As a Commercial/SBA Lender, you need this knowledge to determine the credit strength in any new deal.  When a bank is considering investing in a new SBA lending platform, it is just as vital to fully understand the costs associated, the variables involved and the timeline to profitability.  Recently, one of my new clients told me that they had already completed the “budget” for a new SBA lending initiative at the bank.  Like many created “budgets”, it was a quick view of what was to be expected.  Adequate for exploratory purposes, but not when you decide to commit to an SBA lending platform.

I was asked by this client to complete a 3 year SBA departmental budget. When completed and compared to the budget created by the bank, they could not have been more different.  I completed two models for 3 years each. The first showed results based on holding all the loans.  The second model showed results based on selling the SBA guaranty portion on the secondary market.  You can probably guess which one made money in the first year and which one did not show a profit until late into the second year.

There are so many variables that need to be considered in an SBA budget:

  1. Forecasting how many loans to be approved and funded in each of the 3 years.
  2. What average loan size to anticipate?
  3. What average pricing on the loans should be targeted?
  4. How many days or weeks from initial approval to a closed and funded loan?
  5. What incentive should be paid to commercial lenders for doing an SBA loan?
  6. Should we pay broker fees and how much?
  7. If we sell the SBA guaranty, what average pricing should be expected?
  8. Should you charge a packaging or processing fee and if so, how much?
  9. Should we totally staff the department or utilize a Loan Service Provider (LSP) until loan production proves full time staff are necessary?
  10. Who and what skill sets are needed first as you get started and how much will they cost?
  11. What percentage of total loan production should be calculated for Loan Loss Reserve?
  12. What should be spent on marketing?
  13. Should we just use internal commercial lenders or hire dedicated SBA lenders?
  14. What incentives and how much should be considered for SBA BDOs?
  15. What other “best practices” should be accounted for including software, training, etc.?

And there are many other questions or variables that need to be taken into consideration.  But when the budgets are completed, management can have a very clear understanding of the costs involved and when and what and how much money can be made in each of the first 3 years.

Solid information for making sound decisions about starting and growing an SBA department makes a huge difference in those new SBA lenders who succeed in a big way and those that don’t come close to meeting expectations.

(For more information and assistance in developing an SBA department budget, please contact Tim@SBAadvisors.com)

“The Top 5 Requirements to Starting or Expanding an SBA Lending Platform” written by Tim Terry, CEO of SBA Advisors.

Welcome to the SBAadvisors Blog!

Dec.
01 st

The Top 5 Requirements to Starting or Expanding an SBA Lending Platform: #4 PROCESS

By |

 

Best Practices in SBA Lending 

Compliance and the SBA Guaranty

The fourth “P” is Process

At the beginning of this blog series, we discussed the foundation of an SBA lending platform: the SBA Credit Policy (aka: the PLAN).  Just as important to your success is to write an SBA Loan Policy and Procedures Manual establishing the PROCESS.

Why establish the PROCESS?

There is a history of lenders who make a few SBA loans with little to no experience.  Too often one of these loans go bad and the lender discovers that the SBA will not honor the guaranty because of a failure in SBA compliance.  There are other lenders who make a significant number of SBA loans. When one loan goes bad, there tends to be sleepless nights wondering if the SBA will find a reason to not honor the guaranty. As long as you are lending, you will have loans that default.

However, you do not need to worry or have sleepless nights.   The facts are that the loans not honored by the SBA due to a compliance issue represent only .05%.  This shows that the vast majority of SBA lenders focus on compliance throughout the life of the loan and they apply compliance on a very consistent basis.  You can too!

Compliance Requirements

It is important to know that the SBA loan has significant compliance requirements throughout the entire loan process.  Ensuring the request is eligible may be the most simple of all the compliance requirements.  Other additional compliance requirements are in the processing, closing, funding and servicing of the loan.

Identifying these requirements and making policy and procedures to ensure compliance throughout the process should be documented in an SBA Loan Policy and Procedures Manual.  The SBA SOP 50-10-6 covers these processes and requirements in great detail. However, it is vital for your SBA team to have these processes outlined. This mitigates no balls are dropped through the cracks and that every loan follows the exact same process.

By establishing your process with compliance built in, the lender can develop a premier fast and efficient loan process.  I am asked often by SBA lenders how they can attract more loan applicants.

The lenders who have a streamlined process that delivers timely results for the applicant can build a strong reputation in the marketplace.  When the focus is “results for the customer”, word spreads quickly where to go for an SBA loan.

A thoughtful and practically written Policy and Procedures can ensure this and give the bank a very competitive edge.

(For more on writing an SBA Policy and Procedures Manual, please contact Tim Terry at Tim@SBAadvisors.com)

“The Top 5 Requirements to Starting or Expanding an SBA Lending Platform” written by Tim Terry, CEO of SBA Advisors.

Welcome to the SBAadvisors Blog!

Sep.
29 th

The Top 5 Requirements to Starting or Expanding an SBA Lending Platform: #1 PURPOSE

By |

With over 30 years of experience in setting up SBA lending departments, Tim Terry, CEO of SBA Advisors, has compiled “The Top 5 Requirements to Starting or Expanding an SBA Lending Platform”.  This will be a blog series and today we kick it off with the first requirement…

 

Knowing your PURPOSE for SBA Lending

 

Why can SBA lending be the most successful and profitable program offered by your lending institution? Why do some SBA lending institutions grow rapidly and others never seem to achieve their potential? When the economy slows down, why does SBA lending increase?

This blog series will focus on answering these questions and more. While the SBA loan program has literally doubled in size in the past 5 years, the SBA industry experts expect it can double again in the next 5 years. Every commercial lender should be considering the strategic utilization of the SBA 7(a), SBA 504 and the USDA B&I programs for significant loan growth and fee income.

This series will focus on 5 P’s for the successful launch or expansion of SBA lending. These 5 P’s will provide the basis / outline for your SBA lending PLAN which is critical in gaining acceptance by your senior management (especially your CCO) and the board of directors.

The first is “Purpose”. Let’s start by discussing why your lending institution should be doing SBA lending?

Strategic reasons include but are not limited to the following:

  1. Saying “yes” to more customers. These government credit enhancement programs provide for a much longer amortization than commercial loans. Longer term simply means no balloon payments and improvement in debt service coverage. As a slowdown in the economy occurs, reduced cash flow impacts most businesses. What might have been a traditional conventional loan last year, now becomes an SBA opportunity, simply due to longer amortization.
  2. Improving customer’s cash flow is also a very vital reason for SBA lending. One simple example would be using a longer amortization for refinancing loans with shorter terms and higher interest rates.
  3. Inadequate collateral will kill a new deal. SBA loans are based more on cash flow / debt service coverage than collateral. How does a lender do a commercial loan for a retail store in a leased location with virtually no collateral? If the customer meets the other “Cs” of credit, the SBA guaranty, typically 75% (but can go as high as 90%,) addresses the lack of adequate collateral. In fact, I think we all would prefer to have a guaranty from uncle Sam than having “dad sign the loan.”
  4. Improving your CRA is becoming critical for those lending institutions seeking to add locations or buy other lending institutions. There is no faster way to do this than by establishing a strategic plan and implementation of an SBA lending platform.
  5. Selling the SBA guaranty portion of the loan helps the lender generate fee income. The secondary market for SBA loans is vibrant. When demand for very secure investments rises, so does the secondary market. The SBA industry has averaged better than 110% on the sale of the guaranteed portion of the loan. Add another 1% on-going servicing fee and you can begin to understand the profitability impact of SBA lending. (see note 1 below).
  6. Historical statistics show that implementation of marketing an SBA program leads to an average increase in commercial loans of 15%.
  7. Loan growth, especially in a highly competitive environment requires great “brand identification.” Marketing SBA lending provides a huge attraction to new business. How many lenders do you know that actively promote a strong commitment to small business? And the lack of this marketing effort allows for national SBA lenders to come into your market and steal existing and new customers. These national lenders with no locations even in the same state, spend a lot on marketing. To compete, your lending institution needs a strategic marketing plan specifically to attract quality loan customers. When a potential loan customer starts thinking about where to get a loan, you want your “Brand” to be first on everyone’s mind.

While all these reasons give cause for great consideration to SBA lending and form your “purpose”, these are the positives. In the next blog, we will discuss the government and loan compliance aspects of SBA lending. This can be a daunting challenge unless you have your plan in place to address it.

 

Note 1: For a financial comparison of the profitability of an SBA 7(a) loan, sell vs hold, please contact the author at Tim@SBAadvisors.com

“The Top 5 Requirements to Starting or Expanding an SBA Lending Platform” written by Tim Terry, CEO of SBA Advisors.

 

Welcome to the SBAadvisors Blog!

Jan.
28 th

Press Release January 26, 2014

By | Leave a Comment

 SBAadvisors announces new SBA “tradigital” marketing programs to SBA lenders across the country.

Dallas, TX – Today Tim Terry, President of the 22 year old firm, SBAadvisors, Inc.  announced the addition of new marketing services to banks seeking to grow their SBA government guaranty lending.  “Having set up 10 SBA lending programs for lending institutions across the country, it is exciting for the company to now offer what has been missing in the industry; SBA loan marketing support!”

The general public’s view is that banks do not want to lend to small business and those that do, make the process very difficult.  SBAadvisors can now assist the banks that are seeking to change this attitude and attract small business customers.

Tim reports that the Small Business Administration (SBA), has released new policies and procedures to enhance and simplify the process for banks to use the SBA program to help small businesses.  “In many ways, these new policies show that the SBA is working hard to help banks to get needed capital into the hands of credit worthy small businesses.  Lenders need to make small businesses aware of these significant advances.”

While banks are very strong in marketing for auto and home loans, they have yet to apply efficient marketing approaches to reach out to small business.  SBAadvisors is now offering “Tradigital” marketing strategies for lenders to be able to reach the small business sector.  This is a combination of traditional marketing approaches of radio and print advertising with digital approaches utilizing new SBA branded websites along with advanced SEO (search engine optimization).

Many ad firms are telling banks that traditional marketing approaches of print and radio are no longer effective.  The overwhelming focus is now on SEO strategies.  While SEO is a mandate, print media cannot be ignored.   Customers do like the ability to hit a button and submit an inquiry or an application, but print media can drive customers to the website in more cost effective ways than pay per click.

SEO works.  However, it can take six to twelve months before you show up on the first page of a search engine.  Print ads provide an immediate branding specific to the desire to pursue small business loans.  A combination of both digital and print is a mandate for any level of immediate success.

About SBAadvisors

SBAadvisors is a national consulting firm that specializes in support services to SBA lenders nationwide.  While the company has a national reputation as the largest executive search firm that is SBA employee specific, it has also actively involved in setting up new SBA lending departments from coast to coast.  The new division of tradigital marketing services completes the strategic services needed to become a contender in the hotly competitive bank environment.  To learn more please visit the company website:  www.SBAadvisors.com

Contact

For more details please contact:
Tim Terry, President
SBAadvisors, Inc
940.381.6200
tim@SBAadvisors.com

 

To see original press release, go to: http://www.pr.com/press-release/538838

Welcome to the SBAadvisors Blog!

Jan.
15 th

Keep up with SBA News

By | 1 Comment

You, our clients and candidates, are the reason we at SBA Advisors do what we do. We want to make a difference and have an impact on your growth and success. We are committed to being available to you and assisting you in whatever ways we can. You can count on us to be your one-stop resource, regardless if you’re looking for the next step in your career, are looking to hire exceptional talent, or are wanting to build an SBA program and implement a custom SBA marketing strategy. We are your source for creative SBA solutions.

SBA Advisors and Social Media

Now that 2014 is well under way, SBA Advisors is excited to regularly update you with SBA news, SBA job openings, and job search tips. In addition to changing and updating our brand identity and web presence, SBA Advisors has added Twitter, Facebook, and a LinkedIn company page to the ways you can connect with us. This is a great way to get job alerts, SBA news and updates right to your social media feeds. You can find our social media handles at the end of this blog.

SBA News Blog

SBA Advisors will work toward providing current and essential information to you by means of our Advisors blog. Our blog has categories of information and resources based on the different ways in which our clients and candidates will need us. Keep checking in with us- we have so much to share! We will also be sure to post links to the blog on all of our social media outlets to make certain you are the first to find out about any new content.

Stay in touch

Throughout our website you will find contact forms, as well as the ability to sign up for SBA news and job alerts. We would love to hear from you if you have questions or would like to know more about what we can do to help you. Consulting is part of what we do and we are eager to talk with you and hear where we can assist you. Feel free to call us for a free 30-minute consultation to discuss your department and staffing needs.

[Any information you provide us, whether it be your contact information or your resume, will remain strictly confidential. We do not disclose personal information that is provided to us without consent, and we never sell or give away personal information. We hold those we work with in the highest regard and strive to build and maintain an atmosphere of trust and respect.]

SBA Jobs

If you are looking to take the next step in your career, continue checking in with us and keep an eye out for new job openings posted to our website. Just in the last two days we have added three new opportunities with great organizations.  Feel free to share the job listing if you know of someone that might fit the position. Each opportunity posted to our website has a link that allows you to send to a friend.

As always, the SBA Advisors team is available to answer questions and is eager to hear from you. We are grateful for your continued support and look forward to serving you in 2014!

 
Twitter: twitter.com/sbaadvisors
Facebook: facebook.com/sbaadvisors
LinkedIn: linkedin.com/company/sba-advisors

Welcome to the SBAadvisors Blog!

Nov.
27 th

Welcome to SBA Advisors

By | Leave a Comment

Terry & Associates, dba SBAsearch, would like to announce that we are now SBA Advisors. While our name has changed, we continue to offer the same expertise and knowledge to SBA lenders across the country. We are still the top choice for executive search!

In recent months, the team has been working diligently on our brand identity and web presence, as well as learning how we can better meet the needs of the market we serve. During that time, we learned that one of the biggest under-served areas of small business lending is the marketing of those departments.

We have developed a new program focused on creating specialized marketing strategies for SBA lending departments. This program aims at evaluating existing marketing methods, determining how accessible information is to potential customers, and examining the department’s existing website. Our goal is to utilize our expertise to boost your department’s exposure in your area. We want your customers to find you, the preferred local SBA specialists.

Experience, combined with passion to deliver solutions to maximize efficiency, is what sets SBA Advisors apart. We offer a breadth of services unique in the SBA industry as we bring staffing solutions, consulting, and marketing expertise together. Whatever challenges you face, we are your SBA team with creative solutions.