5 Must-Ask Questions for Your SBA Lender

1. "Has your credit committee already provided preliminary approval?"

This question often gets blank stares from lenders, and that's exactly why you need to ask it. Many lenders issue term sheets without preliminary credit approval, leading to unpleasant surprises down the road.

A good answer sounds like: "Yes, our credit team reviewed the basic structure and financials. While they'll need to complete full due diligence, they're comfortable with the deal and don't see any red flags."

A bad answer? "We'll submit it to credit after you sign the term sheet." This could mean discovering the credit committee has concerns about fundamental aspects of the financing that should have been addressed upfront.

2. "Are you a PLP (Preferred Lending Partner) for SBA loans?"

This single question could save you a month of waiting. PLP lenders have authority from the SBA to approve loans in-house, while non-PLP lenders must send every loan to the SBA for review. You think banks take a long time, guess how long the government takes?

The timing difference is substantial:

• PLP lenders: Internal approval only (7-14 days)

• Non-PLP lenders: Additional SBA review (21-45 days or more)

If your lender isn't a PLP, it's not necessarily a deal-breaker. But you need to factor this into your timeline expectations. Some non-PLP lenders have excellent relationships with their SBA offices and can still close quickly. The key is understanding exactly how they'll handle the process.

3. "What's your complete timeline from term sheet to close?"

This question often shows the disconnect between sales promises and operational realities. A detailed answer should break down:

• Initial underwriting review (typically 5-10 days)

• Third-party report ordering and review (10-15 days)

• Credit committee final review (5-7 days)

• Documentation and closing (10-15 days)

Watch out for vague answers like "30-45 days" without specifics. You want a lender who can walk you through their exact process and timeline, including potential bottlenecks and how to avoid them. All these items should be done in parallel instead of waiting for one after another.

4. "What documents do you need that typically delay closing?"

Smart borrowers start gathering time-consuming items before they are requested. Common bottlenecks include:

Environmental Reports: These can take 2-3 weeks and are often required for properties with any history of industrial use. Ask if a simple Phase I will suffice or if more extensive testing might be needed.

Life Insurance: If required, starting the application process early is crucial. Policies over $1m often need medical exams and extensive underwriting.

Entity Documents: Surprisingly, basic corporate documents often cause delays. If you have multiple entities or complex ownership structures, start organizing these immediately.

Landlord Agreements: If you lease your location, your landlord may need to sign a subordination agreement or extension. This can take weeks if they're not familiar with the process.

5. "What's your process if we need to expedite closing?"

This question reveals both capability and flexibility. The best lenders have established processes for accelerated closings when needed. They should be able to explain:

• How they handle parallel processing of requirements

• Their relationship with key third-party providers

• Any additional costs associated with expedited service

• Recent examples of accelerated closings they've completed

A strong answer includes specifics like: "We can order the appraisal and environmental reports simultaneously with initial underwriting, and we have two designated fast-track processors for urgent deals."

Putting It All Together

The most successful borrowers use these answers to create a closing timeline roadmap. They identify potential bottlenecks before they occur and gather time- consuming documents proactively.

Our borrower that closed in 42 days used these questions to:

• Choose a PLP lender with strong preliminary credit approval

• Start his life insurance application immediately after signing the term sheet

• Order the environmental report during initial underwriting

• Finance upcoming major contracts without delay

Key Takeaway

In lending, knowledge isn't just power - it's speed. The right questions upfront can save weeks of delays later. Your lender should appreciate, not resist, this level of due diligence. If they can't or won't provide clear answers to these questions, that might be the most important answer of all.

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