Three Reasons Why Lenders Should Make SBA Part of Their Strategic Plan

Total SBA is a leading Lender Service Provider, offering nationwide support to financial institutions in their small business lending operations. Our team of experts can help you build a profit center with an efficient SBA lending platform. With the right support, your institution can give customers much needed financing options, while increasing your bottom line without incurring additional overhead. There are many advantages to SBA lending - let Total SBA show you how you could be utilizing it to full potential.

SBA PROFITS

Most financial institutions are struggling to grow deposits - so what is the most profitable way to serve your clients and maximize use of your institution’s liquidity? Suppose in 2024 a lender funds $10,000,000 in SBA 7a loans and sells the $7,500,000 of guarantees. They would end up with $2,500,000 of loans. Therefore, the lender has only used a small number of deposits to generate $10,000,000 in loans for their clients.

PROFITABILITY

In today’s market, the lending in the above example should earn at least 9.0% premium on the $7,500,000 of SBA guarantees sold, or $675,000 in gain. The lender also gets to keep a 1.0% interest strip on that $7,500,000 in guarantees sold, or $75,000. If your net interest margin is 5.0%, then the lender will earn another $125,000 on the $2,500,000 of unguaranteed loan portions retained. In reality, the loans will probably be funded evenly over the year so the accrual of interest and servicing if averaged would be half of those numbers. But still, the lender will have generated $675,000 in gain on sale, $37,500 in servicing and $67,500 in NOI, totaling $775,000 of profits on $2,500,000 in retained balances.

RISK MITIGATION

Given the current economic conditions and high-rate environment, many borrowers are stretched and often the only way to help them is through the longer amortizations and flexible terms available through SBA. Plus, the lender may need the SBA guarantee to mitigate the higher risk that exists with some businesses. Lastly, the SBA PPP program was understandably popular with borrowers and now those businesses are expecting lenders to offer SBA programs to help them grow their operations.

By utilizing Total SBA, a financial institution can immediately create a highly profitable SBA program without any overhead expense and at the same time provide needed services to their business clients.

Written by Brian Carlson