The SBA Lender Vetting Checklist

Why Most Borrowers Don't Ask These Questions

Most borrowers evaluate lenders on two things: rate and loan amount.

That makes sense on the surface. Those are the numbers that show up in the term sheet. They're easy to compare.

But rate and loan amount don't tell you whether this lender will actually close your deal. They don't tell you how long it will take, what could go wrong, or whether you're a good fit for their credit box.

The lender who quotes you the best rate isn't always the one who closes. I hear about this constantly from borrowers who come to us after a failed process.

A 95% close rate at prime plus 2.5 beats a 60% close rate at prime plus 2. Every time.

The Questions That Actually Matter

Credit Box Questions

Before you get deep into a process, you need to know whether your deal fits this lender's appetite.

What industries do you avoid or have restrictions on?

Some banks won't touch hotels, gas stations, or healthcare. Others have had bad experiences with specific sectors and quietly avoid them. You don't want to find this out at week 4.

What's your collateral policy?

Do they require full collateral coverage? Will they do "air ball" deals (loans without hard collateral)? If so, what's their limit? Some lenders cap air balls at $500K. Others will go to $1.5M or higher. This matters enormously for service businesses and asset-light acquisitions.

Do you allow outside equity investors?

If you're working with a search fund, an investor group, or family money, some lenders get uncomfortable. They want to see the money coming directly from your pocket. Others don't care as long as the structure meets SBA eligibility requirements. Know this upfront.

What's your minimum DSCR?

Debt service coverage ratio requirements vary. 1.25x is common, but some lenders will flex to 1.15x for strong deals. Others won't budge below 1.3x. If your deal is tight on coverage, this could be the deciding factor.

Process and Timeline Questions

Timeline kills more deals than credit. You need to understand exactly how this lender operates.

How quickly can you issue a term sheet from a full package?

Good lenders can turn a term sheet in 24-48 hours if they have the information they need. If someone tells you "a week or two," that's a signal about how the rest of the process will go.

Is this term sheet vetted by credit, or will surprises come later?

This is critical. Some lenders run deals by their credit officer or committee before issuing a term sheet. That means what you're signing has real teeth. Other lenders issue term sheets first and involve credit later. That's when surprises happen.

Ask directly: "Has anyone from credit looked at this deal?" You want a yes.

What's your pull-through rate from term sheet to close?

This is the question most borrowers never think to ask. A lender with a 95% pull-through rate operates very differently from one at 65%. The first group only issues term sheets on deals they're confident they can close. The second group is more aggressive upfront and figures it out later.

How long does underwriting actually take?

"30-45 days" is what everyone says. Pin them down. What's the realistic timeline assuming you provide documents quickly? Is their underwriting team backed up? Do they have capacity to prioritize your deal?

What's your realistic close timeline from signed term sheet?

Add up term sheet to commitment, commitment to clear-to-close, and closing logistics. For a well-run lender with a cooperative borrower, 45-60 days is achievable. If they're hedging toward 90 days, ask why.

Deal Structure Questions

These questions determine how much cash you need and how the deal will be structured.

What's your minimum equity injection?

10% is standard, but not universal. Some lenders will go to 5% if there's a full-standby seller note covering the gap. Others won't. And "full standby" means different things to different lenders.

If you allow seller notes, what are the terms?

Do they require full standby for the full 10-year SBA loan term? Or just 24 months? Can the seller note be on partial standby with interest-only payments? These details affect how you structure the purchase agreement.

What post-closing liquidity do you need to see?

Some lenders want to see 5-10% of the project cost sitting in the borrower's account after closing. That's cash you can't use for the down payment or inject into the business. If you're tight on capital, this could be a problem.

Do you require a deposit relationship?

Many banks prefer (or require) that borrowers move their business banking to them. Some offer better rates in exchange. Others just make it a condition of closing. Know whether this is a preference or a requirement.

Why We Ask These Questions for You

When we onboard lenders to our platform, we ask exactly these questions. Every single one.

We track credit boxes, collateral policies, timeline performance, pull-through rates, and current lending appetite across 100+ SBA lenders.

Why? Because matching matters.

A lender in "high growth mode" with a wide-open credit box and a 95% close rate is a completely different partner than one who's tightening up after losses and running a 10-week underwriting process.

You shouldn't have to figure this out yourself by getting six weeks into a process with the wrong lender.

The Bottom Line

The best rate means nothing if you don't close.

Before you sign your next SBA term sheet, ask the hard questions. Understand the credit box. Understand the timeline. Understand what could go wrong.

Or work with someone who already knows the answers.

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