Choosing an SBA Lender

November 16, 2023

by an investor from Worcester Polytechnic Institute in Atlanta, GA, USA

How do people feel about various SBA Lenders? Are they all really the same post-close?

In Jeff Sands' turnaround book, he has a rule of thumb to seek lenders with 500-2000x AUM of the revenue of your target (so for a $1M Revenue Acquisition target, seek lenders with $500M-$2B AUM). He argues this is where they will have more interest to work with you to succeed - versus using a bank with $50B+ AUM for a $1M revenue target - they will just ask for the keys and send you to bankruptcy court. If things go South, the smaller bank will have a workout with you as opposed to a larger bank.

Does this really matter? Is all capital a commodity and just go with the best terms?

What are people's experience with SBA lenders post-close?

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Although I have not read Jeff Sand's book, I can tell you that in general small community and community regional banks are much more willing to work with customers when issues come up then much larger institutions in general, although there are some larger institutions that work with their clients when they have problems quite well. However, that same rule does not necessarily apply to SBA lending. SBA lenders are restricted in what they can offer when a work out comes into place based on what the SBA rules allow and what the SBA will approve. So whether you are with a large SBA lender or a smaller SBA lender, you might find your treatment much similar just because the lenders are restricted in what they can do in workout. Now, if you are having some troubles and need some payment deferments, most lenders will work with you on that, but you might find a bit more cooperation in the early stages of trouble from a community bank lender as they are going to be easier to get ahold of and there is quicker path to management that makes the decisions. I hope this information helps. I would be more than happy to talk in more detail how lending works at any time at redacted

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