A strong banking relationship is very important.

The recent collapse of several banks could deal a blow to the Small Business Administration’s 7(a) lending program.

When the credit market tightens there has historically been a higher volume of SBA lending.  One bank involved was one of the largest lenders in the 7(a) secondary market — in which loans are purchased from banks, freeing them up to make new loans. They have now ceased buying new bids on 7(a) loans. This will make it very difficult for lenders to continue to have liquidity to make new loans. Especially those non-depository institutions like small business lending companies.

Now is the time when banks should be looking more at 7(a) loans and the government guarantees they offer as investment strategies are changing. 

Most community banks who serve so many communities haven’t done an SBA loan in the last two years. They need to get to them , simplify the program and make sure they can use good credit underwriting standards in order to deliver these loans.  The SBA is also finalizing a rule that would expand its popular 7(a) loan lender network to include several additional nonbank lenders.

Make sure to keep up a great banking relationship in these fast changing financial times.  What was once thought of as a given, might now need more research on the borrowers end.

Weichert Commercial Advisors