July 2, 2015
By Bob Coleman
Editor, Coleman Report
Sludge in the SBA 504 loan approval process is the number one concern for the industry.
Is the result from my “What Keeps you up at Night?,” poll last week.
This sums it up best;
“What keeps me up at night is 504 projects. SBA is extending turnaround times and asking CDCs to provide additional information, although my Bank and the CDCs already approved the project based on information on hand. Why doesn’t the SBA simply relegate the CDC industry to eligibility review, packaging and servicing? That would save a couple of days waiting on CDC approval. The last thing a buyer and seller want to hear from CDC is ‘turnaround time is about 15 business days’. I would like to know if this is an issue affecting other 504 first mortgage lenders. Maybe it is just my projects because my skills are declining as I close in on retirement.”
More choice SBA 504 processing comments:
“First, I’m not even sure you can see my name, but I must remain anonymous with my comments. Now, the things that keep me up at night as a 504 originator are (a) poor communications, (b) slow response times and (c) inconsistent application of the SOP and CFR, all by SBA/SLPC. Regarding (a) – e504 crashes have delayed receipt of submissions at SLPC by a few hours to several days within the last week. Regarding (b) – Response times have been getting better, and now average a little more than five days, but we’d like to see them get closer to the 3-5 days we’ve experienced historically. Note that the e504 delays are not included in the response time stats. Regarding (c) – I could go on and on here… It’s just part of the cost of doing business for a CDC not using delegated authority, but it is frustrating.”
Now, I don’t get your name, but in full transparency, I do capture your IP address. However, I don’t have NSA skills, so I don’t know how to match the IP address with your name. Don’t worry, even if I could, I wouldn’t.
This is definitely the summer of discontent for CDC employees.
“I work for a CDC and we have multiple programs beyond the 504 program. The better question is – what doesn’t keep me up at night? I have potential borrowers not preparing for being business owners, business owners that show losses year over year expecting large loans with no collateral, and business owners that have struggled and legitimately turned their business around expecting immediate financing like they see on TV, the internet, or from calls from payday-like business lenders. Balancing that against regulation and compliance requirements, a rising rate environment, credit policies, credit administrators, Board of Directors, and SBA’s ever changing internal guidelines that don’t get expressed outwardly until we get a declined loan from nowhere. I’ve prided myself in the past on being an efficient lender but that feeling is long gone. Every day feels like I’m running in mud trying to get a loan done.”
SBA 7(a) lenders aren’t as eloquent in the survey as their 504 counterparts, but some are still losing sleep.
“Keeping the processes moving efficiently in a labor intensive industry. Pipelines are robust but Packaging, Closing and Funding processes are getting to be more cumbersome and slower which in turn slows down the velocity of top line income and creates customer service problems.”
“* Possible PARRiS review * Concern over unidentified systematic documentation issues
Lenders with delegated authority not following the same rules.”
Now, for the One-Hit wonder comments:
“Managing a staff, hitting my budget/numbers.”
“Greedy SBA lenders who continue to price SBA loans at P+2.75% quarterly float to maximize gain on sale premiums.”
“Credit risk, managing long-term growth, keeping employees engaged.”
“Worrying about things beyond my control. However, once a recognize that these things ARE beyond my control. I give it to God, say some prayers and I’m able to get back to sleep!”
“The number of small business startup plans without a clue as to what financial projections should contain – it seems to be worse every year.”
“That Congress will do away with the SBA, particularly the 7a and 504 loan programs.”
“Funding for SBA programs, Franchise Reviews.”
“The roller coaster economy while trying to lend to borrowers over 10 + years on a loan product. Stability is the lender’s friend; while uncertainty is his nemesis.”
“Compliance Issues assuring our SBA Guaranties are clean.”
“What does the future hold for lending?”
“Getting stung by straw borrowers.”
“History tells me we’ll have a 4% loss on the portfolio but all the loans are performing. Which ones will eventually fail?”
“Why am I paying broker fees AND SBA commissions?”
“The long term future of the 504 loan program and how it remains competitive going forward, given competition in 7a as well as conventional options.”
“Making sure that my answers to questions are timely, accurate, and a win-win that makes people happy while also being a good steward of the bank’s assets and protecting the guaranty on loans that move forward.”
“The lunacy prevalent in SBA Lending.”
“Regulators incessant action steps to demoralize community bankers versus the public stance of being an industry advocate.”
“Not knowing the true level of my employer’s commitment to SBA lending.”
“Our Bank’s “concentration” areas. We are close to maxing out in a couple industries. Then what? That’s what keeps me up at night.“
“Prime going up to 10% or higher.”
“New Congress/Administration de-funding SBA.”
And, of course there has to be one joker in every crowd.
“Sheer anticipation of the next morning’s Coleman Report.”
Thanks to all who participated. Very insightful, other than the last comment, stuff here!