In an August 2014 article in the Harvard Business Review, Karen Mills, the former head of the Small Business Administration, examined the reasons why small business lending has not yet recovered to levels seen before the 2008 financial crisis. One of the barriers she noted are the high transaction costs of small business lending.
Maintaining an in-house department that understands the technical and detailed requirements for small business lending through the SBA and USDA can be cost-prohibitive. The Coleman Report estimates approximately $600,000 in fixed costs to have adequate in-house capability. A bank would need $10 million in guaranteed loans to offset that expense each year.
How can you profitably lend to your small business borrowers?
Small business lending is vitally important to the overall health of the U.S economy – and even more important to community banks, in particular. Two out of three net new jobs are created by small businesses. They are the heart, soul and economic engine of Main Streets across the U.S.
Lending to small business doesn’t have to be a purely altruistic endeavor. In fact, government guaranteed small business loans can be one of the most profitable areas of commercial lending. When you partner with VITAL Financial Services for SBA and USDA lending, our expert staff will manage the complexities of guaranteed lending while you focus on other priorities. We will:
Act as your out-of-house government guaranteed loan department.
Assist your lenders in reviewing the financial position, management ability, experience, expertise, and operations of small and mid-sized borrowers.
Use a detailed, process-based approach that eliminates mistakes, minimizes hassle, and better protects the lender guarantee.
Structure loans so the premium is maximized, and facilitate loan sales in the secondary market.
We don’t add to your fixed costs – you only pay when you use our services.
As your bank thinks about how to best fulfill the important mission of small business lending, we’d like to be your trusted partner. Contact us if you’d like to talk.