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August 17, 2016

Best Practices: Getting Started with SBA Lending: SBA Express Loans

by Michelle Sergent Kaas

At a recent conference, I met several traditional lenders that expressed interest in SBA lending, but they did not know where to get started. A great place to start is the SBA Express Loan.

SBA Express loans must meet SBA’s standard eligibility requirements as set forth in 13 CFR ยงยง120.10 and explained in SOP 50 10 5(H). Lenders must have a valid SBA Loan Guarantee Agreement (SBA Form 750 and 750B for short term loans) and a valid SBA Express Supplemental Loan Guaranty Agreement (SBA Form 2424) to close SBA Express Loans. Lenders can apply for SBA Express authority at the same time they are applying for SBA lender authority. SOP 50 10 5(H), Subpart A, Ch. 1 (IV)(C) describes the SBA Express Program and the process for becoming an SBA Express Lender.

SBA Express provides flexibility and a quick turn around time. The SBA will respond to your Express application within 36 hours. SBA Express can be used for term loans and lines of credit. SBA Express provides for a maximum loan amount of $350,000 and a maximum SBA guaranty of 50%. SBA Express lenders can set the rates up to prime plus 6.5% for loans of $50,000 and less and up to prime plus 4.5% for loans over $50,000.

SBA Express lenders can utilize their own forms in addition to SBA Form 1919 and SBA Form 1920. SBA Express lenders are not required to take collateral for loans under $25,000 and must follow their own internal collateral guidelines for loans over $25,000. SBA Express lenders must follow their own internal credit guidelines for similarly sized non-SBA loans and must include a credit elsewhere analysis which sets forth why the borrower would be unable to obtain credit at reasonable terms without the SBA guaranty.

In addition, SBA Express Lenders can take advantage of the Veterans Entrepreneur Act of 2015 which provides a waiver of the upfront SBA guaranty fee on SBA Express Loans to veterans or their spouses approved through September 30, 2016. To qualify, borrowers must be 51% or more owned and controlled by a Veteran, a Service-Disabled Veteran, a Transitioning Active Duty Military Member, a Reservist/ National Guard Member, a current spouse of a Veteran, a current spouse of a Veteran Transitioning Active Duty Military Member or Current Reservist/ National Guard Member, a Widow of an Active Duty Service Member who died in service or a Widowed Spouse of a Veteran who died of a service connected disability.

For those lenders who may not have closed an SBA Express Loan recently, but would like to start up again, please note that the SBA issued a revised SBA Express Loan Authorization on January 8, 2016 via SBA Information Notice 5000-1372 requiring the use of the revised Authorization beginning January 15, 2016. The revised SBA Express Loan Authorization can be found by clicking here.

For more information regarding SBA Express Loans, contact Michelle at mkaas@starfieldsmith.com or 267.470.1167.