SBA Loan Industry
The SBA loan industry can be divided into distinct categories:
- Large bank institutions, such as Chase, Bank of America and Wells Fargo, generate the bulk of their SBA loan volume by loans, especially the express loan and line of credit, offered to those who would be declined for 'normal' bank credit due to factors such as length of time in business or slightly more conservative underwriting factors. Banks have sophisticated computer systems that generally make this process seamless, and are quite different from other financial institutions who utilize SBA lending for separate and distinct purposes.
- SBA loans are used heavily by banks of all sizes to finance the purchase or construction of business owner-occupied real estate (i.e. real property purchased for commerce). Many banks offer SBA loans only for this purpose. In particular, they finance properties that a bank would consider too risky to finance conventionally, due to being of a special use or environmentally risky nature that can make their resale value limited. Some example properties include motels, gas stations and car washes.
- SBA loans also encourage individuals to buy existing business. Since, unlike in real estate transactions, commercial lenders can fund referral fee earned by business brokers helping people buy and sell businesses, this segment of industry is supported by smaller banks and standalone finance companies who understand this sector.
Read more about this topic: Small Business Administration
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