L
oans from the Small Business Administration
(SBA) are an essential element of business
ownership in the USA. SBA loans tend to be
borrower friendly, have simple terms and
low interest rates. These loans sometimes get a bad
rap when lenders who are not experts at SBA lending
do a poor job. An inexperienced lender can cause the
process to be lengthy and frustrating which often leads to
misinformation about these loans.
As an expert SBA lender, we want to dispel the myths
surrounding SBA financing and encourage insurance
agents to consider SBA financing as a viable option for
business loans.
• SBA loans are slow. FICTION. When considering an
SBA loan, seek out a lender who is part of SBA’s Preferred
Lender Program (PLP), like Live Oak Bank. PLP status
allows the bank to approve the loan without waiting for
the SBA’s approval -- the bank acts on behalf of the SBA.
Many banks offering SBA products use outside third
parties to compile the application and loan information.
This process often leads to frustration and delays. At
Live Oak, we “have the pen” and make decisions quickly.
Typically loans move from application to closing in 45
days. With our online platform, loans under $350k can
“Click to Close” in 20 days!
• SBA is a drag on taxpayer dollars. FICTION. The
SBA is a government agency that generates its lending
capacity and conducts operations without any taxpayer
burden. The SBA is a self-funding agency requiring no
congressional appropriations. The SBA enjoys real bipartisan support.
• SBA loans require ridiculous paperwork. FICTION.
All loans, regardless of type, require paperwork. At Live
Oak Bank we have streamlined and automated the loan
process. With Live Oak Portal, customers can securely
upload all loan documentation, fill out online forms and
electronically sign all documents. While Portal enables
a streamlined, efficient process for borrowers, the credit
decisions remain with the lending team.
• SBA loans have no risk to the originating bank.
FICTION. The SBA guaranty is 75% leaving the bank an
actual credit risk of 25%. At times, an insurance agency
SBA loan will get to final approval at an inexperienced
bank, and the bank is unfamiliar with insurance agencies
and gets spooked by the 25% unguaranteed portion.
Then the deal falls apart. Live Oak Bank has a very low
default rate because we understand the industry, credit
risk, and the SBA requirements. This track record
enables our PLP status and technology efficiencies.
• SBA interest rate, terms, and conditions are attractive.
FACT. SBA interest rates are currently 5.5% to 6.25%
variable. Fixed rates are available, too. Prepayment
penalties are based on loan term. SBA loans do not have
“covenants,” so there is no danger of your loan being
called due to missing revenue or EBITDA requirements.
The SBA does require repayment of the loan, consistent
with all lenders.
• SBA loans have fees. FACT. Yes, the SBA requires a
“guaranty fee” of approximately 2.75%. This fee covers
the SBA securing a significant portion of the loan.
However, at Live Oak Bank, we charge NO origination
or additional fees. The SBA receives 100% of the fee.
Other inexperienced SBA lenders may charge fees above
the SBA guaranty fee and may not be aware of discounts
that may be available. If you are a veteran, the SBA
guaranty fee is discounted 50% - a great feature for those
who have served our country.
• I can get the same SBA deal at my local bank.
PROBABLY NOT. Local banks value your relationship,
but may or may not have SBA experts in-house. Our
customer experience, post-closing surveys, and key
performance indicators (KPIs) consistently exceed
almost all other banks and lenders. We strive to give you
the best deal possible in every way – lowest appropriate
interest rate, no origination fees, speed, and responsive
and knowledgeable people.
We value every customer at Live Oak Bank. Check out
testimonials on our website from clients we are very proud
to serve.
Kelly Drouillard is the general manager of insurance lending at Live Oak Bank,
Wilmington, NC. Reach her at [email protected] or
913-980-7773.
|MAY - JUNE 2016| KANSAS INSURANCE AGENT & BROKER
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