BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

SBA Loans Funded Faster Than A Speeding Bullet

Following
This article is more than 10 years old.

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.

There are instances when a merchant cash advance or a credit card is the perfect solution for a small business borrower; unfortunately for many business owners this type of funding is the only credit available to them right now. SmartBiz is making low-interest SBA loans available to Main Street—which is what has me so excited.

I believe it was Aesop who coined the phrase, “Necessity is the mother of invention.” Nowhere is this more true than small business lending. Evan Singer and his team at SmartBiz saw a need and leveraged technology to solve it.

“Fast access to inexpensive capital is one of the biggest challenges facing small-business owners,” says Singer, General Manager at SmartBiz. “Small business owners shy away from SBA loans because the conventional bank loan process can take weeks or months to close.”

By taking the application online, these folks have eliminated a lot of the cost, time, and paperwork associated with an SBA loan application (I hope the SBA and their cadre of member banks are taking a lesson or two from these guys). This technology reduces the typical two to three months-long application process to less than 30 minutes with a very borrower-friendly application, instant pre-approval, and funding in as little as five days of completing the application. Yes, I said five days—unheard of for an SBA loan.

To do this, they’re looking for very specific borrowers who, in turn, are looking for loan amounts within a specific range. They’re offering predetermined loan products from $5,000 to $150,000, and have them dialed in. When I asked about credit requirements, Singer's answer to me was, “Borrowers need to have good credit, but they don’t have to be perfect.”

Potential borrowers do need to qualify for an SBA loan, so this isn’t for everyone. However, I believe this is powerful motivation for small business owners who might be on the edge to get their financial house in order because a low-interest, SBA-backed loan, isn’t out of reach if they’re looking for the cash to purchase a new pizza oven, dentist chair, machine tool, warehouse expansion, or fill dozens of other growth-related cash flow needs.

I agree with Singer when he identifies access to inexpensive capital as one of the biggest challenges small business owners face every day. If you can’t tell, I couldn’t be more enthusiastic about what Singer and his colleagues are doing.

“We’ve been working with the SBA on this since the very beginning,” he shared with me. I’m excited to see if more will come from this partnership with Golden Pacific Bank (their lender partner), the SBA, and SmartBiz. I’m convinced this type of strategic and innovative approach to small business lending, combined with right-fit alternative loan products, represents the future of where Main Street will find the capital they need to grow the economy, hire employees, and keep local communities strong.