Independent Banker - March 2018 - 69

SMALL-BUSINESS SMARTS
The SBA's other
loan program
Should community banks consider offering the SBA Express program
for smaller loans?
By William Atkinson
T
he most well-known
SBA loan program,
of course, is the
traditional 7(a)
program. But for
community banks that want to
offer an alternative to their smallbusiness
customers, it might be
worthwhile to consider the SBA
Express program. Compared
with 7(a) loans, Express loans
have lower maximum loan
amounts for borrowers and lower
SBA guarantees for lenders, but
greater lender authority and
higher maximum interest rates.
SBA Express loans are common
today, according to G. Arne
Monson, president of Holtmeyer
& Monson, an SBA lender service
provider serving community
banks in Memphis, Tenn. Over
the past three years, the Express
program has represented slightly less
than 10 percent of total dollars but
50 percent of the total SBA approvals,
measured in total number of
transactions. " These are small-dollar
transactions, and most lenders make
them in order to take advantage of the
expedited processing, " Monson says.
In addition, the SBA requires
less paperwork from the lender for
Express loans, which can reduce the
Industry
VOICE
There are two other programs
that are part of the overall
Express program that could
provide niche opportunities for
community banks.
The Veterans Advantage
program is exclusively for small
businesses that are owned and
controlled by veterans (including
active duty military, reservists,
National Guard and spouses of
military personnel who died
during service or of a serviceconnected
disability).
And the Export Express protimeline
for lender loan approval. The
reason for this, and for the shorter
review period, is that the SBA gives
lenders more independence in the
loan approval process, placing more
trust in the lender's review and underwriting
abilities, since the loan amount
maximum and the SBA guarantee are
lower than they are for 7(a) loans.
gram is for small businesses that
need funds to enter a new export
market or expand in an existing
export market.
It is important to consider all
options when offering SBA loans
to customers, and then decide
what is most strategically important
to your bank and most useful to
your customers. " While it is quicker
and cheaper to use the Express
program, " says Monson, " we advise
our clients that, if they are looking to
mitigate risk, the 7(a) program, with
its 75 to 85 percent guarantee, is far
more advantageous. "
SBA Express
program
Loan amount maximum
William Atkinson, a longtime
Independent Banker contributor,
is an Illinois-based journalist
specializing in banking and
small-business issues.
SBA guarantee
(maximum)
Collateral required
Maximum interest rate
Average SBA review
period
$350,000
50%
None for loans under
$25,000
Prime plus 4.5-6.5%
36 hours
SBA 7(a)
program
$5 million
75-85%
At least 10% of loan value
Prime plus 2.75%
5-10 business days
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Independent Banker - March 2018

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