If you’ve been looking into SBA loans as a way to grow your small business, you may have come across the term SBA Preferred Lender.

Here’s what prospective borrowers should know about that designation:

What Is an SBA Loan?

With a streamlined application process that’s fully in-house, you can get the funds you need more quickly.

The U.S. Small Business Administration is an independent agency of the federal government that assists small businesses and entrepreneurs. The SBA partners with local financial institutions to provide affordable loans for a range of business purposes, including startup costs, working capital, real estate and equipment purchases, and debt refinancing. The SBA guarantees a portion of each loan to mitigate lender risk and enable more small-business owners – including those in underserved communities – to access the capital they need.

Additionally, the SBA makes direct loans to small business owners and homeowners who are recovering from a declared disaster.

Reasons to Consider an SBA Loan

SBA loans offer small businesses key advantages, including:

• Competitive rates: Because they’re a lower risk for lenders, SBA loans often feature lower interest rates.
• Lower fees: SBA loans may involve an upfront and/or yearly service fee, but these are generally nominal.
• Longer terms: Maximum maturities range from 10 years (for working capital, inventory, and equipment) to 25 years (for real estate).
• More flexibility: Loan amounts range from $500 to $5.5 million, depending on your needs and capacities.
• Continued support: The SBA and its local partners offer free and low-cost business training and counseling.

What Are My Options?

There are several types of SBA loans you may want to consider, including:

• 7(a) loans, which are the most popular SBA loans and can be used for a wide variety of purposes
• 504 loans, which can be used for long-term fixed assets like real estate and major equipment
• Express loans, which feature an accelerated turnaround time and have special options for exporters
• Microloans, which provide up to $50,000 for smaller startup and expansion needs
• Disaster loans, which help businesses overcome economic injury or damage in the wake of a declared disaster

What Is an SBA Preferred Lender?

An SBA Preferred Lender is a financial institution that is authorized to process, close, and service SBA loan applications without sending them to the SBA for approval. To earn this designation (which is sometimes referred to as the Preferred Lenders Program, or PLP), financial institutions must meet strict standards set by the SBA and demonstrate a track record of successfully processing and servicing small-business loans. Preferred Lenders must be nominated by their local SBA district office and approved by SBA headquarters. This credential must be renewed every two years.

The SBA also has a Certified Lenders Program (CLP), which is often confused with the Preferred Lender Program (PLP). Like Preferred Lenders, Certified Lenders must show a good track record of handling SBA loans. The key difference is that Certified Lenders must send all loan applications to the SBA for approval.

The Preferred Lender Advantage

Working with an SBA Preferred Lender can offer small businesses several key benefits:

• Faster turnaround: It’s trite but true – time is money. With a streamlined application and underwriting process that’s fully in-house, with no SBA review required, you can get the funds you need more quickly. That means you can seize opportunities that just won’t wait and get a head start on your big plans.
• More flexibility: Since they’re calling the shots, a Preferred Lender may have more freedom in structuring loan terms to suit your business’s capacities and goals. They can offer a personalized experience along with favorable rates and terms that allow you to optimize your borrowing power and cash flow.
• Useful insights: You’ll have a knowledgeable financial partner who understands the needs of small businesses and can guide you through the whole loan process and beyond. Community financial institutions with Preferred Lender status have a thorough understanding of procedures as well as your local business environment.
• Greater peace of mind: Because SBA Preferred Lenders have to work hard to earn and maintain their designation, you can bank and borrow with confidence. Their lending portfolios are subject to periodic audits by the SBA, which provides an extra layer of assurance that the institution is operating with integrity.

Is Your Lender a Preferred Lender?

To confirm that your financial institution has been duly designated as an SBA Preferred Lender, you can contact your local SBA district office or visit sba.gov.

Getting Started

You can work directly with your chosen lender to learn more and get the ball rolling. They’ll let you know what documents you need to gather and how long you can expect the process to take. In the meantime, you can gear up for success by reviewing how to get ready for your business loan meeting.

Take the First Step Today

To explore all your small-business financing options, including SBA loans, consult your financial institution.

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