Should I Use a Small Business Broker to Find My SBA Lender?

Learn more about how to find the right Houston small business lender.

A common question I hear from small business owners is whether or not it is beneficial to use a broker when seeking SBA financing. My answer is almost always no, it is not necessary. This is not because I think brokers don’t have a place in business lending. There are many loan brokers who can give good direction and financial advice to help you grow your business. But when it comes to SBA loans, I think it is best to work directly with a reputable SBA lender for these main reasons:

Established Relationships

If you already have a business relationship with a bank or credit union that provides SBA lending, it makes sense to go to them first. You have a track record with them already (hopefully a good one) that can help in the application process. I think this is especially true of smaller community banks and credit unions that can take the time to get to know their small business customers and understand their goals and needs.

Product Placement

The SBA has many products that cater to a wide range of borrowers. For example, I specialize in the SBA 7(a) loan program, a partially government-guaranteed loan program which allows participating lenders to assume more risk than they would by originating conventional bank financing. With this product, we can accomplish lower down payments, longer repayment terms, and easier qualifying criteria than conventional bank financing, because our repayment risk is reduced by the partial government guaranty.

But not every SBA lender is equal and lending criteria varies by institution. How do you know if the broker in your transaction is going to find an SBA lender who will approve your financing?  Is the broker’s recommendation the best one for you to follow?  The answer is, “It depends.” Lenders who specialize in SBA loans will be most familiar with the various products and their strengths and weaknesses, so they’ll be more adept at prequalifying you and placing you in the product that best meets your needs and financial profile.

Turnaround Time

Working directly with an experienced SBA lender can speed up the application and approval process. Government guidelines are always changing, but as an SBA specialist they’ll be on top of recent changes and new product guidelines for a smoother application process. If time is a factor, you’ll also want to choose an SBA Preferred Lender as they can complete the entire process in house without having to send your application to the SBA for approval.

How do You Find the Right SBA Lender?

If you’re a small business owner seeking funding for a new project, you do not need a broker to find a suitable SBA lender. Any SBA loan expert, like myself, will be happy to refer you to a trusted and experienced lender in your area. The SBA also has excellent resources online. Check with your local district SBA office, and with your local SBA lending trade organization, for recommendations of accommodating SBA lenders for your particular loan request. You can find your local district SBA office at www.sba.gov.  The professional trade organization for Houston area SBA lenders is called the Houston Association of Government Guaranteed Lenders. Their web site is www.haggl.com.

If You Do Choose to Work with a Broker

If you do choose to go through a broker, make sure it’s one that specializes in your industry. The best SBA lender recommendations come from real estate brokers, business brokers, and loan brokers who are very experienced with transactions involving the industry represented by their small business client.  Having had other clients who successfully achieved SBA financing for similar businesses in that industry is an indication that the broker knows from his own experiences which SBA lenders have been most accommodating in the business owner’s market.  Also, having successful experiences placing the financing for their clients, these brokers are in a position to help the applicant gather all the information necessary to make the transaction successful. The broker is motivated to get the deal done as quickly as possible, because he will be earning his sales commission and loan referral fee.  If you are using the SBA guaranteed loan program, make sure the lender pays your loan referral fee.  The borrower should not have to pay the broker’s loan referral fee, because there are lenders in the SBA 7(a) government-guaranteed loan program who will pay the broker’s loan referral fee for you.  If the broker is experienced with transactions like yours, he is not likely to refer you to an SBA lender that does not have a strong appetite for your business.

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About Bruce Hurta

Bruce Hurta has extensive experience in Small Business Lending. He has served in a number of commercial lending and banking capacities in his career including, President of a Houston-area community bank for 6 years, managed Independence Funding Company, a non-bank start-up in 1994, where he developed his SBA lending expertise. Bruce spent 4 years in Finance as a bank examiner for the Texas Banking Department, 7 years in executive management at two community banks, and 14 years as SBA Lender. He is active in the commercial realtor and business brokerage communities, along with various business and industry organizations. Bruce Hurta is Vice President - Business Development in Houston, TX for Fidelity Bank SBA Lending nationwide. Fidelity Bank offers SBA 7(a) loans, SBA 504 loans, and USDA loans for small businesses to purchase or construct new buildings for their small business operations, to acquire a business, to expand a business or to buy out a business partner.
This entry was posted in SBA Loan Guides, Small Business Resources and tagged , , , , . Bookmark the permalink.

4 Responses to Should I Use a Small Business Broker to Find My SBA Lender?

  1. Gary W. Bucek says:

    Hey, don’t forget about your local SBDC guys who send business your way every day. . . with NO FEES.
    Thanks Bruce,
    Gary Bucek
    San Jacinto College SBDC

    • Bruce Hurta says:

      We love our SBDC guys! I serve on the advisory board of the University of Houston Small Business Development Center. We have many small business borrowers who have used the free services of their local SBDC for business planning and other small business advisory services. Thank you Gary Bucek for all you do for your community!

  2. Bruce,

    You bring up some good points but you also left out some. You make the assertion that no brokers are SBA specialists, that simply is not true.

    A broker can also shop the loan with many SBA specialists in different Banks AND Credit Unions and find the best rate AND term that is available. There are 100’s of different lending instituions that do SBA loans, so how will they know they got the best deal only talking to one lender? You are limited to your Credit Union rates and terms and you have to admit, rates and terms can vary greatly from lender to lender.
    With a Broker, we only need the information once from the borrower and we check to make sure it is complete and accurate. Since we are a wholesale account, our turn times are typically faster than dealing directly with the Credit Union.

    An SBA loan can be a very long, drawn out process and a borrower typically needs help structuring the loan request BEFORE getting to the lender.

    Your post was very good but I think a borrower needs more than one opinion and quote. The same as getting a second opinion from a Doctor before a major procedure because this is a major deal.

    Daniel Peterson
    http://CommercialLoansofTexas.com

    • Bruce Hurta says:

      Please re-read the last paragraph. I stand by my assertion that small business borrowers in the state of Texas, where I originate SBA financing, should be aware of unscrupulous brokers in the marketplace. Texas does not yet have a requirement for licensing of commercial loan brokers, and it is important to research the credentials of the broker before engaging their services. With that said, most of our best SBA loan business is referred to Members Choice Credit Union by extremely adept and qualified loan brokers, business brokers, and commercial real estate brokers. We love to work with brokers like this. They know our requirements, they know their business, and they learn enough about their clients to make quality referrals. In fact, we like working with them so much, that we pay them significant referral fees for referring their quality clients. Your points are well taken. Thank you for contributing them to this blog post!

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