Independent Banker - July 2024 - 62

Guest Experts:
Lending
How to serve your customers in today's market
while increasing profitability & reducing risk
Challenge/Solution: The banking industry is facing numerous challenges that threaten its traditional operating models. Regional
banks, in particular, are seeing profitability eroded by the need to offer competitive interest rates on deposits to retain customers.
SBA lending, when done efficiently, offers an attractive financing tool for customers while allowing banks to increase liquidity by
selling, holding, or refinance existing debt to generate profits.
The Importance of SBA Lending in the
Current Banking Environment
There are many ways to continue to serve your customers in
today's market while increasing profitability and reducing risk.
SBA loans provide solutions that are a mutually beneficial way
to improve liquidity for you and your customers. Total SBA
helps financial institutions optimize small business lending by
offering expert guidance to build a profitable, efficient SBA
lending platform. This support enables institutions to provide
essential financing options, boost profits, and avoid extra
overhead.
SBA Profits
Given the recent events in the banking industry, SBA lending
deserves a closer look at the advantages it offers. The key
to SBA 7a lending is that the government guarantees 75%
of the loan. This full-faith guarantee is easily salable on the
secondary market for premiums recently as high as 15%.
Liquidity
Aside from its earning potential, the liquidity component of SBA
lending is especially valuable right now, given the high cost and
scarcity of deposits. Unlike traditional commercial real estate loans
or C&I loans, which cannot be easily sold or participated, SBA
loans can be sold immediately and without re-underwriting the
transaction.
Interest Rate Sensitivity
Having seen years of low interest rates, it was impossible for a
bank not to have funded some portion of their portfolio into low
fixed rate loans, which are now far below their net interest margin
targets. However, those banks that have been active with SBA
lending, which is almost always variable rate, have had the interest
rates float up as the Federal Reserve increased rates.
Risk Mitigation
As banks tighten their lending either because of liquidity issues
or stricter underwriting guidelines, more borrowers will be turned
away and will seek financing elsewhere. SBA lending may be a way
for your bank to pick up some of these clients and use the SBA
guaranty to mitigate 75% of the risk of that loan.
CAMELS Rating
It's clear to see that SBA loans can positively influence virtually
every component of your CAMELS rating. The banking industry
is evolving rapidly. Regional banks can thrive by leveraging SBA
lending. If you would like to learn more about how to successfully
grow this part of your institution, reach out to schedule a one-onone
with our team of SBA experts.
Brian Carlson, President
Direct (310) 467-0795 | BCarlson@Total-SBA.com
2321 Rosecrans Ave. Suite 3210, El Segundo, CA 90245
Learn more about us at Total-SBA.com

http://www.Total-SBA.com

Independent Banker - July 2024

Table of Contents for the Digital Edition of Independent Banker - July 2024