Inc.com - Why are SBA Loans Drying Up?

The newspapers have recently been filled with stories of how SBA loan activity has declined.

Why? The answers are many according to Robb Mandelbaum of Inc.com who wrote "Why Are SBA Loans Drying Up?". Tighter underwriting standards, higher borrower fees, higher lender audit fees and fear of the SBA not honoring the guarantees.

Here's what I have experienced and heard directly from lenders...

Home equity has dried up and most prospective borrowers aren't offering any collateral. It is becoming rare to find a lender who uses the SBA guarantee to shore up a lack of secondary collateral. More and more it seems the lenders are underwriting to conventional loan standards and taking the guarantee as icing on the cake.

Given that much of the decline in loan activity is the SBA Express product which only offers a 50% guarantee from the SBA, this makes a lot of sense. A bank is more likely take a 50% guarantee (rather than the 7a's normal 75% guarantee) when there's plenty of outside collateral in the form of real estate.

No real estate - fuggedaboudit!

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Tags : Inc. Magazine , SBA loans