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Updated: August 3rd, 2023
The Small Business Administration (SBA) helps small businesses get essential financing for growth, expansion, working capital, and debt refinancing. The SBA doesn’t provide the funds—they just back up to 85% of the loan amount to lower the risk for banks and alternative lenders.
It’s notoriously competitive, paperwork heavy, and painfully long to secure an SBA loan. However, small businesses are willing to invest the time and effort because these loans carry low interest rates, high borrowing amounts, and generous repayment terms. The whole process (from application to approval to funding) generally takes anywhere between 60 and 90 days.
Fortunately, there’s a better way.
SBA Preferred Lenders help borrowers get SBA loans faster than they would with a common SBA lender. They’ve gone through great lengths and jumped through hoops to earn this Preferred Lender status from the government, and this helps streamline the entire lending process—which is a win-win for both you and the lender.
Curious how an SBA Preferred Lender can help you get much-needed funds faster? We’ll tell you everything you need to know.
When you apply for an SBA loan, your lender must approve your application, and then you have to wait for approval from the SBA. Your lender’s approval process is likely pretty quick and straightforward, but things slow down when your application is handed over to the SBA.
To bypass this roadblock, the SBA created a Preferred Lenders Program (PLP). This program gives lenders the final credit decision on making SBA loans, streamlining the entire process and cutting out the 4-to-6 week SBA approval process.
Not just anyone can become an SBA Preferred Lender, though. This designation only comes to lenders who process and service SBA loans efficiently for years. The SBA will also take into account the lender’s processing volume, performance, and knowledge of SBA policies.
The SBA will also consider the lender’s level of risk. Since the SBA is still financially backing these loans, they want to ensure lenders mitigate risk while still servicing loans to businesses in need.
Lenders who receive PLP status don’t keep it forever. The term only lasts for 2 years, and then the lenders must go through a recertification process.
When it comes to finding an SBA loan, you should always look to first work with a Preferred Lender. Not only can these banks and alternative lenders streamline your funding process, but they know the ins and outs of these loans better than anyone else.
Here’s why your small business should always work with an SBA Preferred Lender:
If your current lender isn’t an SBA Preferred Lender, it’s worth searching for a new financial institution to process your SBA loan. Even if speed isn’t your main concern, these lenders will make the entire process smoother and less of a headache.
PLP and CLP lenders aren’t the same thing. The Certified Lender Program (CLP) lets approved lenders service SBA-backed loans with streamlined processes. CLP lenders can use their own application forms and documentation (approved by the SBA), but the SBA gets the final word on the approval.
Since your loan application will still need to go through 2 underwriting processes, approvals aren’t nearly as fast as with a PLP lender. However, a CLP lender is quicker than a non-preferred or non-certified lender, so they’re still not a bad option.
Lenders can receive CLP status by building a solid track record of servicing SBA loans. If they have a positive history of successful lending and have proven they can work efficiently with their local SBA office, they can apply for the CLP designation.
At Funding Circle, we only work with the best-of-the-best SBA lenders. Our network of lenders provides in-house approvals and accelerated processing, meaning you get answers and money in the bank faster.
You’ll need a business with at least 2 years of operations, minimum annual revenue of at least $400,000, and a minimum FICO score of 650.
We help small businesses secure SBA 7(a) loans for as little as $25k or as much as $500k. These terms last up to 10 years with a flat 6% interest rate. We’ll pair you with a dedicated loan specialist who will get to know you and your business so that they can help you complete your SBA loan application and secure the perfect loan.
Use an SBA 7(a) loan to expand your business, invest in growth, consolidate business debt, cover working capital costs, or tackle an emergency. Thanks to the speed of our lenders, you don’t have to sit around waiting—you get access to top-notch financing in no time.
Ready to get started? Begin your application here (it won’t affect your credit score) to get the ball rolling on your next SBA loan.
Michael Jones is a Senior Editor for Funding Circle, specializing in small business loans. He holds a degree in International Business and Economics from Boston University's Questrom School of Business. Prior to Funding Circle, Michael was the Head of Content for Bond Street, a venture-backed FinTech company specializing in small business loans. He has written extensively about small business loans, entrepreneurship, and marketing.