Are Local Banks Good for SBA loans?

Are Local Banks Good for SBA loans?

When a small business owner thinks they want to apply with their current or a local bank it is primarily based on prioritizing familiarity. “I’m familiar with this specific bank because I drive by it on the way to the office”. Or, “the local branch I bank at is familiar with me so I have the best chance of my loan getting approved with them”.

Your current or local bank may be the perfect SBA match for you. If you have a relationship with your local bank and feel the most comfortable with approaching them first, then you should. See what they say and decide.

However, it is the bank’s familiarity with SBA lending and your industry that may be more important for you to consider. Analytics show that a business owner’s current bank or a local bank branch is usually not a top ranked SBA lender for their combined specific business industry and loan amount.

If you love working with your local bank then great, but for an SBA loan, consider the top SBA lenders for your industry and loan amount tier are going to usually be more likely to approve your loan and provide a smoother lending process.

If you’re looking for a local SBA lender you won’t have problems finding one. 59% of SBA lenders funded 100% of their loans to In-State projects.

While this is a clear majority of banks, these loans represent only 7% of all funded SBA loans and 6% of funded dollars for the year.

77% of SBA lenders had 50%+ of their loans funded to IN-STATE projects. These banks represented 18% of funded loans and 20% of funded dollars.

23% of SBA lenders had 50%+ funded dollars to OUT-OF-STATE loans representing 82% of FY2024 SBA funded loans and 80% of funded dollars.

24% of SBA lenders only funded one SBA loan and 50% of SBA lenders funded less than five over the previous year.

Usually, the top ranked SBA lenders for approving loans for your industry and loan amount in your state are not a local bank, or who you currently bank with. A local bank may only approve less than a handful of SBA loans per year. Half of banks funding an SBA loan do less than five in a year with a quarter funding only one.

While you may be familiar with your local bank, if that bank is in the half that approves a handful of SBA loans a year, there are SBA lenders that are very familiar with your specific industry, and likely approve more loans for your industry per year than your local bank approves in total.

When an SBA lender does a lot of loan volume for a specific industry, they have the ins and outs, nuances, and the workarounds down pat. When a bank only approves one, or a few per year, it’s difficult to become an expert on SBA lending, more-or-less an expert on SBA loans to your specific business industry type.

What to ask your local bank if considering for an SBA loan:

Past Experience: Is the bSee Article: 3 Essential Questions for Matching With the Right Lenderank experienced in lending to my industry?
Current Focus: Is the bank currently focused on lending to borrowers like me?
Matching Criteria: Can I qualify for the bank's approval criteria?
Brand Familiarity: Is the bank already familiar and favorable of my franchise brand?

See Article: 3 Essential Questions for Matching With the Right Lender

This article is authored by Darin Manis, founder of LoanBox.

Source: All SBA 7(a) data shared is based on all SBA lending from all sources and not from SBA lending through LoanBox. SBA data and reports are not from the SBA but from SBA data from the lending analytics platform developed and maintained by SBADNA Analytics. SBADNA and LoanBox are both owned by the same parent company FuseSync LLC.  LoanBox and SBADNA does not validate or verify the data released by the SBA and provides no warranty of data accuracy or completeness.  

LoanBox Has Top In-State and Out-of-State Lenders

In addition to top specific industry lenders we’ve also sought out top local SBA lenders and top-ranked state lenders who offer a local lending option for a growing number of areas. When you complete your loan package the LoanBox algorithms go to work and you instantly see the SBA and conventional lenders you match 100% of their dozens of criteria variables. Select one or all of the lenders to access your LoanBox package from their LoanBox. Receive loan proposals, select the winner and continue the process to closing, receiving alerts whenever the loan advances to the next process stage. Or you can have a LoanBox Advisor handle everything for and with you navigating the process to funding. Use LoanBox to get your big small business startup loan done right with the right lender the first time around.