Timing on choosing your SBA lender?

March 11, 2024

by a searcher from University of Stellenbosch in Littleton, CO, USA

I have several lenders interested to finance a deal that I have under LOI, and received multiple lending proposal letters. My question for the Searchfunder collective is: when should I make the call which lender to work with? Can I wait until I have a formal term-sheet from a couple of lenders? Or choose one early on, based on the initial loan proposal, and focus on the paperwork involved with that bank?
My reasoning for working with 2 or more lenders for as long as possible, is that I suspect the rates and terms can change as we get closer to final underwriting terms, so I want to keep my options open for as long as possible. But Im concerned that it will affect my credit score or "creditworthiness" if more than one application lands in-front of the SBA. This is my first acquisition, so not sure how the final process work between me, the lender, and the SBA, and how Im affected. Also, there is already a lot of paperwork and admin involved, so another reason to select a bank earlier than later - but im willing to accept the admin pain if there is upside later on.
So to summarize the question, choose your SBA lender early, or wait as long as possible, or somewhere in-between?
(posting this anonymously since there are several lenders on this platform)

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

You will want to get terms from multiple lenders like you already have. The challenge you have post terms is that most lenders require a deposit before submitting for approval and sometimes that deposit is non-refundable if they approve the loan and you do not move forward, or at least any portion they have spent on third party costs is non-refundable. So it can be expensive to have multiple lenders move forward with the approval process.

You need to interview each lender. I would not just count on the terms for making a decision. I would find out if the Bank is a PLP lender (meaning once they approve the loan it is automatically approved by the SBA), what other deals they have done in that industry, how long the current lender has been with the Bank (this can be key in how long the process takes), what the timeline looks like for their process going forward, and whether they ran the deal by their credit team before issuing the term sheet. Once you find the lender you a most comfortable with that they can get the deal done, I would move forward from there.

Many lenders do not pull credit until they get to the underwriting stage, so you should be safe from that standpoint getting multiple quotes.

If you have any additional questions or need any further assistance you can reach me at redacted Good luck picking the right lender.

Reply by a searcher
from University of California, Berkeley in Seattle Metropolitan Area, WA, USA

Since I didn't see it mentioned above - if going SBA route, you should be working with a lender that is part of the PLP (Preferred Lender Program) so that the lender's closing process is inclusive of the SBA process. If not, then you will be looking at an extensive closing time. PLP will help in a) banks know what it is to close your deal, and b) have everything organized enough so that your timings SHOULD align with an efficient timeline (with a caveat that the buyer and sellers are usually the ones who slow deals down, not the lenders, so try to be working to obtain what is necessary concurrently).

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