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.