Welcome to the SBAadvisors Blog!

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:

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

Nov.

13^th

The Top 5 Requirements to Starting or Expanding an SBA Lending Platform: #3 PEOPLE

By Tim Terry |

Best Practices in SBA Lending Staffing or Using an LSP

As mentioned in earlier blogs, there is a lot of SBA compliance that factors into a successful SBA lending platform. To maintain a consistent compliant process, it takes experienced SBA lenders, SBA credit analysts and SBA loan processors. While SBA lending has doubled over the past 5 years, the number of experienced SBA staff has not. Supply and demand have made SBA talent at least 25% more expensive than their counterparts in commercial lending.

So whether you are starting a new SBA lending program or simply wanting to expand and grow, it is a very real challenge to know how to approach staffing the SBA group.

There are thankfully two approaches. One is simply to pay market pricing for the SBA experience you need. Second is to utilize an LSP service.

One of the best things to come out of the great recession is the SBA assistance that is available through Loan Service Providers (LSP). These companies came together as a result of many highly valued and experienced SBA lenders being laid off during the recession. To keep busy, these SBA professionals came together to provide complete backroom support for SBA lenders who did not want to do many SBA loans or did not want to invest in hiring until loan production could support it.

Utilizing a qualified LSP while you ramp up production is actually a great strategy. It becomes a variable cost to processing SBA loans.

These are a full-service LSP’s providing support in determining eligibility, preparing credit memos for you to review and approve, submit applications to the SBA, assist in closing and funding, assist in selling the loan on the secondary market, and provide the 1502 monthly servicing report to the SBA. In addition, they will provide a number of significant and material benefits:

1. They are ready to get started immediately.

2. They provide meaningful training for your lenders and support staff at little to no charge.

3. They bring 50-plus years of experience.

4. They understand and will teach you SBA lending “best practices”.

5. They provide valuable mentoring at no charge.

6. As your SBA lending grows beyond $15mm in annual production, they equip the Bank to handle its own, in-house SBA department, effectively working themselves out of a job. You will benefit from “Best Practices” as you grow.

7. They assist with a seamless transition from an external to an internal department.

8. Transfer responsibility one job at a time. Take on credit then wait to transfer closing.

9. Have a quick question? How about answers at no additional charge.

10. They bring SBA compliance knowledge that is difficult to hire.

11. They seldom charge for the significant amount of work performed on deals that never close.

12. They get paid when the loan closes, motivating them to work in a diligent and timely manner.

13. They provide a variable cost structure; an advantage over the fixed overhead of an in-house team.

14. Seldom will you ever run across a deal type or problem that they have never seen.

15. You don’t worry about the bank competition stealing your newly trained people.

Obviously, the other choice is to hire. Finding the talent you need is a substantial challenge when you may not know much about SBA lending. You should never hire an SBA BDO who says he can build out a department. That is unless, he has done it before. So how do you know who is best to hire?

First, determine how much annual SBA lending you are wanting to pursue. It needs to be at least $10 to $15mm if you want full time staff to process, close and service. Here is my best recommendations on staffing needs based on loan production:

$5 to $15 million: One SBA loan producer and one experienced closing, funding and servicing processor.

$15 to $30 million: Most likely you will need three loan producers, two SBA credit analyst, 1 to 2 loan processors/closers and one loan portfolio servicer. You will also need one of the above people to be in charge of all SBA lending (a division manager).

$30 million and above: As you grow your lending, the worst thing you can do is to be understaffed and allow the credit approval and/or loan closing to drag out to extended time periods. This means understanding how many credit and how many closers are needed for specific levels of production. A lot of this has to do with the average size of the loans you want to do.

I would love to give you average pay for each position, but that has a lot to do with availability of experienced SBA staff in your market. What you pay for a credit analyst in Oklahoma City vs Atlanta, GA as an example, can be very different. My best advice is to work alongside an SBA consultant who can give you valued advice on staffing and save you a lot of money.

I spend time every month talking with lenders, helping them design their SBA lending program. Very seldom is there a financial charge for talking through this important issue. So when you are ready, let’s talk.

“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!

Oct.

20^th

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

By Tim Terry |

Why Have A Stand-Alone SBA Credit Policy

From the last blog, we discussed having a Plan for SBA lending starting with a stand-alone SBA credit policy. Let’s continue the discussion on the mandate for an SBA Credit Policy.

First and foremost, it is important to understand that the SBA credit policy forms the foundation for your SBA lending program.

SBA requires it.

Regulators will want to see it.

It tells the BDO what types of deals and industries you are willing to consider and possibly those type of loans that you know you will never consider.

It says where (geographically) you want to lend. This is very important in maintaining and improving your CRA.

It will outline collateral requirements along with maximum loan amortizations and maximum pricing.

Let’s not forget the importance of establishing SBA loan minimum debt coverages and how that is to be calculated.

And you simply cannot meet the SBA compliance requirements if you do not cover the critical aspects of SBA credit that could cause the loan’s government guarantee to be jeopardized. In fact, the SBA Credit Policy when implemented will ensure SBA compliance.

A good Business Development Officer (BDO) will want to review your credit policy to ensure he can be successful with the type and pricing of generated loan requests. A well written credit policy will actually help in your recruiting efforts.

But having an SBA Credit Policy will not help you establish and grow an SBA lending platform IF your Chief Credit Officer has not approved and shown support for SBA lending. Without the CCO support and encouragement, you will be wasting your time attempting SBA lending.

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

For more on creating an SBA Credit Policy, please contact this author at Tim@SBAadvisors.com

Welcome to the SBAadvisors Blog!

Oct.

15^th

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

By Tim Terry |

In part two of this series on “The Top 5 Requirements to Starting or Expanding an SBA lending Platform”, we address the requirement of having a PLAN.

When would you ever make a loan to a new company without seeing their business plan? And, why would you expect your board and managerial team to agree to implement SBA lending without a defined plan?

You have heard about lenders who hire a Business Development Officer who purports to know SBA lending to start an SBA lending platform. Then a year later, the lender is shutting down SBA lending, liquidating the SBA loans that have gone bad and regretting ever doing SBA lending. This is a classic scenario.

You have also seen lenders who start SBA lending and it becomes a game changer.

What did the successful lender do that the other did not? I have spent almost 30 years and over 28 lending institutions, establishing successful SBA lending platforms. Many of these lenders contacted me to help them get started by finding a successful BDO they can hire. Yet history suggests that you should not just start with hiring a BDO. What does your plan say you should do first?

Several years ago, I was asked by a $28 Billion lending institution to help them start SBA lending. They asked that I hire at least 5 SBA proven loan producers. Sounds easy until you understand what the successful BDO needs in order to continue their lending success. So, I asked the CCO, who will be making the credit decisions? The answer was classic. Apparently commercial credit was their expertise and the current credit team would have no problem in handling SBA loan requests.

BUT, and it is a huge “but”, the proven loan producer wants a credit officer who knows SBA lending. They want someone who has reviewed over a thousand SBA loan requests. Without this experience, a credit officer will not be happy making a lot of “exception to policy loans.” And you don’t want a BDO telling the bank that they should approve every loan request because it is SBA eligible. Eligibility and credit quality are two separate criteria.

The BDO says, I don’t want to be the one who has all the SBA expertise. I need a loan officer who has more expertise than me. Someone who knows how to structure a loan to meet SBA compliance requirements.

I told this $28 Billion lending institution, that I would not and even could not hire proven loan producers without them agreeing to a written SBA credit policy AND hiring an experienced SBA credit manager. The credit policy tells the BDO the kinds of deals you like and don’t like. It gives them all the parameters necessary to get a loan approved. It tells the BDO if their historical and current pipeline of deals, are the type deals that can gain credit approval. This successful BDO does not want to have to reinvent themselves. They don’t want to have to develop an entirely new group of COI’s and brokers.

So who do you think they hired first? And three years later, this lending institution has a very successful national SBA lending program having hired very successful proven loan producers.

In Part One of this series, we discussed the “why” or “purpose” for doing SBA lending at your institution. In Part Two, the discussion is about the “WHAT” of SBA lending. The “what” should be written as part of your PLAN. It should cover the following:

SBA Credit Policy – When making an SBA loan, you are saying that the loan request does not meet your conventional commercial credit policy. In fact, an SBA loan is an “exception” to current policy. Hence the need to establish a written credit policy that explains the parameters for doing these exception loans.

Every SBA lending institution needs an SBA lending Credit Policy. It should contain many of the same criteria that your conventional policy contains, like lending territory, collateral and debt coverage requirements and the other “C’s” of credit.

But most important should be SBA compliance requirements!

The fact is that the SBA will guaranty a very large portion of the loan IF you agree to comply with specific requirements outlined in the SBA Standard Operating Policy manual called the SOP 50-10-6. If you do, you are “protecting the US taxpayer, who pays for the program through their tax dollars. If you don’t demonstrate this, then the SBA may say that you don’t deserve the guaranty and may want to modify or even reject the guaranty”. This sounds harsh. It actually does not happen very often. But the idea that it could happen, should be sufficient to motivate you to know the SOP and put SBA credit compliance in a written format for your entire institution.

Number 2 and following is covered in the next few blogs… Stay tuned!

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

To receive an SBA credit policy table of contents, please contact this author at Tim@SBAadvisors.com

Welcome to the SBAadvisors Blog!

Sep.

29^th

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

By Tim Terry |

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:

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.
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.
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.”
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.
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).
Historical statistics show that implementation of marketing an SBA program leads to an average increase in commercial loans of 15%.
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!

Dec.

18^th

The Most Common Interview Question

By Tim Terry | Leave a Comment

“Tell me about yourself.”

It is the most common interview question, and one that a lot of job seekers find difficult to answer. Dana Manciagli provides valuable feedback in this article provided by Career Mojo through The Business Journals.

Question:

How do I answer this interview question: “Tell me about yourself”? I struggle with that.

Advice from Career Mojo:

I think you are in good company. Most people approach this in one of the following ways:

Babble on and on, hoping to say one or two things that interest the interviewer(s).

Do a résumé walk-through. This is incorrect because the interviewer didn’t say, “Walk me through your resume.” That’s a different question.

Stumble, hesitate and use too many filler words like “umm,” as if it’s the first time the question has ever been asked.

“Tell me about yourself” is concurrently one of the most common interview prompts and one of the most poorly answered. This question, along with others such as, “What are your strengths,” “what are your weaknesses,” etc., should all be scripted well before the interview…

For the complete article, How to answer the most common interview question, click here.

Welcome to the SBAadvisors Blog!

Jul.

16^th

Does your resume have what it takes to get you hired, Part V

By Tim Terry | Leave a Comment

Today we are wrapping up our series on resume writing. The past five posts we have discussed common ways resumes can easily work for or against you. We’ve covered everything from formatting, verbiage and keywords, to providing evidence of success and relocation. There is enough covered to ensure that the 15 seconds that a hiring manager spends reading your resume is enough to get you an interview.

Here are the last tips for this series that we have to offer you.

Leave out unnecessary details.

This is a very important part of editing and updating your resume. Focus on professional essentials that pertain to the position for which you are applying. Do not include hobbies, religious affiliation, and other unrelated personal facts on your resume. It’s essential to eliminate potential for pre-interview discrimination as well as maintain a high level of relevancy to the position and the organization.

It’s safe to assume that in applying for a high-level job you do not need to include entry- or low-level skills. A hiring manager would expect that a candidate would have considerable experience with Excel or Outlook, where as proficiency with field-specific software is much more significant and important.

Give enough information.

Your resume is intended to be a summary, not an entire life history. We mentioned in previous posts it should be a good outline for your interview and a marketing tool to promote you and your valuable skills. Allow room for discussion in your interview. Give enough information to qualify you, but not so much that there aren’t any questions when you meet. If your resume reads like a job description and can apply to anyone, it’s important to give more information about your history as it relates to you. Eliminate the generic details.

Thank you again for reading and keeping up with us. Continue checking in here, LinkedIn and on Twitter for updates and new blogs and series.

Welcome to the SBAadvisors Blog!

Jun.

11^th

Does your resume have what it takes to get you hired?, Part III

By Tim Terry | Leave a Comment

In our last couple of blog posts, we have been discussing ways to make your resume work on your behalf. If you have been keeping up with the series, we would love to hear your thoughts and answer any questions you might have. Feel free to comment on our blogs or e-mail us!

Today we are continuing the series on successful resume writing and covering relocation and leadership experience.

Relocation

If you are open to relocating, mention it in your summary, along with the cities or areas you are considering. This can help prevent your resume from being overlooked simply because of your current address. As mentioned in the last post, always provide your current and up to date contact information; it should not be hard to reach you.

Highlight leadership.

Showcasing your leadership experience, especially when in consideration for a management role, is vital to your resume helping you get an interview. Questions to think about when you’re summarizing your leadership in a particular position: How do you lead a team? What is your leadership style? How many people have you supervised? What success and growth has your leadership promoted? Have you served in upper-management roles?

Hiring managers want to know that you can successfully lead a team. Simply stating that you were credit manager isn’t enough. What have you done that sets you apart from other credit managers applying for the same position? How does your leadership experience align with the organization’s job description? If the hiring manager can pull useful information like this from your history in a quick scan of your resume, it is highly likely that the company will want to know more about you.

Stay Tuned!

Thank you for reading and keeping up with this series! We’ll be back next week with two more tips for using your resume to get you hired. We are here to help, so if you have any questions feel free to e-mail us or leave a comment below.

Welcome to the SBAadvisors Blog!

Jan.

28^th

Press Release January 26, 2014

By Tim Terry | 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