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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!

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!

Nov.

24^th

How NOT To Get A Second Interview

By Tim Terry | Leave a Comment

Have you ever been confident in how things went in an interview, sure that you’d get a call back, but never did? Read this great article by Dana Manciagli about seven habits that kill your chances at getting a second interview.

So many of my clients and readers say, “I aced the interview, but I don’t know why I didn’t get a call for the next round.” Well, I guess you didn’t ace the interview, did you?

Sometimes you do well but they go with another candidate for a variety of other reasons. But having said that, it is also possible that you made some interview bloopers.

When you’re aiming to nail the big job interview, how you speak is as important as how you look. You’ve got the impressive résumé, solid references, and a professional outfit. But careless language could jeopardize your chance of landing that plum job.

Interview expert Darlene Price offers some insight about the seven common habits that can keep you from truly acing that interview:

1. Too much information

Avoid talking too much during the interview. In the business world, time is money. Bosses value employees who speak in a clear, concise manner. By all means, be interesting and use a personable enthusiastic voice, but avoid rambling. Get to the bottom line quickly.

As a general rule, keep your answers under two minutes. This habit not only shows you’re well prepared and succinct, it also allows time for the interviewer to ask more questions and get to know you better. …

Click here to read more.

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!

Jun.

02^nd

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

By Tim Terry | Leave a Comment

In our first blog post of this series, “Does your resume have what it takes to get you hired?, we provided some tips that will make your resume work for you and keep you from getting overlooked. Your resume is often the first thing that human resources or hiring managers will see of you. It is often the easiest way to qualify or disqualify you in moving forward with the interview process. You can read the first installment of our resume series by clicking here.

Prove it.

Give information that provides evidence about your success. Give examples, be specific and steer clear from general, broad statements. For example, rather than stating that you are “goal-oriented”, mention that you contributed to a 20% increase in sales last year. It’s also important to address your leadership style and other major accomplishments in your work history. These are things that can put you ahead in the event that you aren’t the only candidate in consideration.

Providing testimonials is another great way to “prove it”. While reference calls are inevitable, quotes provided by your direct supervisors and colleagues can add a lot of value to your resume. Remember to keep it concise and neat; recommendations don’t have to be long or elaborate.

Provide accurate information.

Make sure your contact information is up to date and complete. It’s important that the hiring manager or human resources can reach you. If you are applying for a position out of state or long-distance, provide your current address and note that you’re open to relocating in your resume’s summary.

Don’t “dress up” your work history or responsibilities. These things will be found out one way or another and will end your resume in the “no” pile. As always, honesty is the best policy when it comes to your experience and skills. Interviews are meant to assess your potential for success at an organization- fibbing can cost you valuable time and opportunity. If there are gaps in your history, note why and include relevant volunteer or consulting work.

Thank you for reading and following us! We at SBA Advisors are here to help you and are available if you have any questions. Go to LinkedIn and Twitter to follow us for regular updates.

Welcome to the SBAadvisors Blog!

Apr.

29^th

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

By Tim Terry | Leave a Comment

A professional resume is something that we all assume to have. We have listed our job history, a summary of accomplishments, and demonstrated growth in promotions and leadership positions. And yet, somehow great candidates can be overlooked simply because of their resumes. Do you know that the average time that a hiring manager spends first reading your resume is just 15 seconds? So it begs the question,

“Does your resume have what it takes to get you hired?”

Here are some tips direct from our 22 years of experience:

Make it easy to read.

Stay away from pre-formatted resume templates and use a font that is simple and traditional at least at a 12 font size. Highly stylized fonts can be difficult to read. Make good use of bullets, various font sizes for headings. If your list of achievements and responsibilities gets too long, use headings and bullet points to help organize them. Make sure it looks good digitally and printed.

Be concise by keeping paragraphs short, trying not to add unnecessary details. A one-page resume without any white space is difficult to read, as is a three-page resume without any substantial evidence of success. Don’t feel the need to keep your resume to one page, especially if you are a mid- to late-career professional. Your resume is meant to be a marketing tool, not a comprehensive career biography, and to give the hiring manager talking points to discuss with you in an interview.

Use their verbiage.

If the job description states that the company is looking for specific qualities or experience in candidates, work key words into your summary and history in context to confirm that you meet the qualifications required for the position.

Your resume should be in plain English but must also engage the reader to want to ask questions about you and how you might be a good fit. Tailor your resume to the position so that rhetoric doesn’t become a key reason why you aren’t considered for a position. Does your resume tell the hiring manager that you meet the skills and qualifications they need, or is it generic and uninspired?

Check back with us next week as we continue this series on resume writing. In the meantime, if you have any questions about how SBAadvisors can help you, feel free to contact us!

Additional Resources:

Korkki, P. “Write a Resume That Shouts ‘Hire Me’”. JobSeeker Weekly, June 18, 2013.

Krumrie, M. “Best Executive Resumes: An executive recruiter shares the secrets to success”. examiner.com, April 5, 2013, http://www.examiner.com/article/best-executive-resumes-an-executive-recruiter-shares-the-secrets-to-success

Goodman, D. “4 Quick Ways To Improve Your Executive Resume”. careerealism.com, http://www.careerealism.com/executive-resume-tips-quick/

Welcome to the SBAadvisors Blog!

Mar.

26^th

Are you overusing “buzzwords” on your resume?

By Tim Terry | 11 Comments

Some of the “power” words used on resumes have lost their power. Your resume can work on your behalf and in your favor or it can set you back. Check out this excerpt from an article in the Dallas Business Journal and see if you need to revamp your resume.

“Job seekers are overusing buzzwords and tired descriptors in the hope that they will magically get the attention of their audience.

I see them on résumés, hear them in networking meetings and interviews, and spot them in the all-important summary section on LinkedIn.

Career clichés are boring, uninspiring, and a turn-off.

Have you used any of the words on this list lately?

- Team player
- Results-driven
- Fire-in-the-belly
- Excellent leadership skills
- Great organizational skills
- Works well autonomously
- Self-starter
- Ability to prioritize
- Customer focused

The words themselves are not the problem — the problem is that they have no value when used alone. Comments like these in résumés are empty. They have no meaning, no credibility.

I have seen as many as 20 or more of these kinds of words listed at the top of a resume — in a candidate’s executive summary. It’s a waste of real estate on the page and can quickly get you tossed into the “no” pile.”

You can read the full article here: Career Mojo: Stop using these words on your resume!

Welcome to the SBAadvisors Blog!

Jan.

15^th

Keep up with SBA News

By Tim Terry | 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