SBA Loans Funded Faster Than A Speeding Bullet

OK, maybe not quite that fast, but faster than I’ve ever heard of. Last week I met Evan Singer of SmartBiz for the first time. Yes, they specialize in small business loans. Yes, they have SBA loans under $150,000 figured out down to a science. And yes, they are on the Lendio platform—but their relationship with Lendio isn’t why I’m talking about them nor am I being compensated by them to share their story.

What they are doing is really good for the smallest small businesses. That’s why I’m talking about them.

Last October the Small Business Administration removed fees on SBA-guaranteed loans under $150,000. I’ve publicly supported this move by the SBA before. I think it’s an effort to get more capital into the hands of the Main Street businesses that create jobs and help local economies thrive and grow. Although last year’s average SBA loan was closer to $380,000 and the year before was around $327,000, it might be interesting to note that before the financial meltdown in 2008, the average SBA loan amount was closer to $175,000—more in line with the needs of Main Street—or the smallest small businesses rather than the biggest small businesses.

I’ve spent most of my career on Main Street (as a business owner and employee). I’ve also spent a few years working in high-tech companies, one of which did revenues around $30 million a year and had over 250 employees at the time—a company that still qualified as a small business but was very different from what I experienced on Main Street. That business would be more inclined to seek an SBA loan in line with the current average than the typical small business you and I likely identify with.

The typical SBA loan process is cumbersome and often disappointing for small business owners who slog through the documentation, wade through months of back and forth, and ultimately discover they don’t qualify for the loan they’re seeking—not because it’s too much, but often because it’s too little and too expensive for most financial institutions to bother with (To be fair, when the underwriting burden associated with a $50,000 loan is about the same as a $500,000 loan, can you really blame the banker who moves upstream to bigger and potentially more lucrative fish to fry?).

“Because bank funding typically takes so long or is unavailable for loans under $150,000, most small-business owners turn to alternative, more expensive lending sources like merchant cash advance or credit cards to fill the gap,” says San Francisco District Director US Small Business Administration Mark Quinn.

Read the full story here.