This post is part one of a four-part series on developing an SBA lending strategy.
Adding SBA loan products to your suite of offerings is an excellent way to add value for your customers and expand your loan portfolio. Unfortunately, many institutions fail to establish a solid foundation for a successful SBA loan initiative. That foundation is built on what we call the three P’s of developing an SBA lending strategy, which are plan, people, and process.
Plan: Create Your SBA Lending Business Plan
Before you pursue your first SBA loan, you need to develop a detailed plan for how you will establish and manage your SBA loan program. According to Brent Ciurlino, SVP of Risk and Operations at Newtek Business Services, your business plan should “define your goals and outline the SBA department, including roles and responsibilities.” He also adds that it is important to determine if you will leverage a lender service provider and work with them to develop key oversight processes. Ciurlino also says it’s important to “design as many internal controls as possible to minimize costs from SBA oversight reviews, as well as ensure that you build a plan that covers the entire life of the loan.”
People: Build the Right Team
Pulling together the right team to develop, manage, execute, and sell the SBA loan program is critical to getting it off the ground and keeping it running over time. There is a shortage of qualified SBA staff in the industry, and there is tremendous expense in recruiting, hiring, and training internal staff. Because of this, many lenders outsource all or part of their SBA department to qualified lender service providers. Over time, as the SBA initiative grows, more of the roles and functions can be brought in-house if it makes financial and operational sense to do so. In any case, it’s critical to put the right people in the right place.
Process: Create a Consistent Method
To successfully deliver an SBA initiative, you need to develop a consistent and reliable process. This process should cover the entire life of the loan and include subprocesses for executing each phase of the loan, for ensuring the desired borrower experience, and for maintaining compliance with all SBA and regulatory standards. This is another area where leveraging a lender service provider is beneficial, as they already have reliable processes and can help you develop your own processes to match internal bank requirements and procedures.
Together the three P’s provide the necessary ingredients for developing an SBA lending strategy. Over the next several posts we will take a deeper dive into each of the P’s to discuss in greater detail the elements that go into building your plan, your people, and your process for your SBA lending strategy. To ensure you don’t miss a post, subscribe to receive the weekly CGS Insider email, which includes the most recent article, breaking SBA lending news, and industry updates.
In our next post, we will dive deeper into developing your plan for establishing an SBA lending initiative.