Many small-business owners who have been turned down for a Small Business Administration-backed loan from a local bank may think they’ve been disqualified from the SBA program. That is not the case.
Business owners need to remember that the SBA is not the actual lender. Consider the SBA like an insurance policy or a government guarantee that bank and lenders use in case a loan goes bad. With SBA backing, the banks and lenders are guaranteed a percentage of the loan. Because of this, the SBA has developed its SBA Standard Operating Procedure (SOP) for banks and lenders to use as guidelines in order to exercise the SBA guarantee for loans.
So when you approach a lender with your unique loan, the lender will base its decision on its credit policy and appetite for risk, as well as how it interprets the SOP. One would think that because there are so many rules and regulations, there would be uniform consistency in which loans get through and which do not. The truth, however, is that this answer is often not so clear. Some banks and lenders interpret the SOP in different ways, and herein lies some of the confusion.
It’s so easy for a small-business owner to think that what one lender says is in fact black and white across the board and assume it to be SBA policy. Borrowers should not take a blanket “no” from one SBA lender as a rejection. The SBA offers incredible benefits to borrowers. You just might have to kiss a few frogs before you meet your prince.