Top SBA Lenders Focus on Technology as Key Differentiator
Welcome to our 2018 SBA 7(a) Loan Market Outlook, an annual forecast of key market dynamics based on the best data available at the time of publication. As our strategic discussions with lenders focus on the SBA loan market and trends we see unfolding in the year ahead, this report attempts to capture the same forward-looking, proactive view as a foundational tool. We hope that you take the time to read our outlook — or at least scan it for the most pressing issues — and consider the implications for your SBA lending business.
Along with the infographic below, summarized are four key themes that appear to be defining the SBA lending market in 2018:
1. Approved Dollar Volume Reaches a Record High
SBA approvals hit a record level in FY 2017, totaling more than $25.8 billion. This 5% increase in the total dollar volume of loans represents the fifth consecutive year of growth in the financing of businesses through the 7(a) Program. Some of the increasing volume trend may be attributed to economic expansion and permanent changes to the SBA Program. But much of this sustained increase in volume is more likely due to the increasing focus on technology by the top SBA lenders.
2. The Role of Technology
The growing competitiveness within SBA 7(a) lending — dominated by a small number of lenders providing more than half of all SBA 7(a) loans — requires the remaining participants to increase their technological sophistication to compete more effectively. Thoughtfully combining marketing, analytical and operational technologies with efficient processes and defined strategy is the only path to sustainable success in SBA lending.
3. Top 50 SBA Lender Trends
The loan volume to be a top 50 lender has significantly increased since 2013. Five years ago, a lender had to authorize approximately $57 million per year in SBA 7(a) loans to rank in the top 50. The amount of volume has now grown by more than 70% to almost $99 million in 2017. As evidenced by the average loan size authorized by the top 50 lenders, these institutions have found an effective way to process smaller loans while attaining higher overall volume levels. In many instances, this can be attributed to an increased investment in technology and process refinement.
4. SOP Changes
The SBA recently issued a new SOP (50 10 5 J) effective January 1, 2018. This version incorporates significant changes, clarifications, and a major re-organization. Ultimately, simplified rules and processes will provide an opportunity to increase volume for many lenders who were otherwise unfamiliar with these regulations while guidelines surrounding eligibility could perhaps have the most profound effect on increasing future volume.
Whether you use this framework or your own, we encourage all SBA lenders to consider the increased role of technology across all aspects of commercial lending.
About Windsor Advantage, LLC
Windsor provides a comprehensive outsourced SBA and USDA loan department to lenders nationwide. With more than 150 years of collective government guaranteed lending experience, cutting edge systems and rigid controls, Windsor Advantage is uniquely qualified to support its clients to develop and implement a thoughtful and profitable SBA 7(a) and USDA lending platform.
Since 2010, Windsor has processed more than $1.7 billion in government guaranteed loans and currently services a portfolio in excess of $1 billion in loans for more than 75 banks across the country. Windsor Advantage has offices in Chicago, IL; Indianapolis, IN; and Charleston, SC. For more information, please visit www.windsoradvantage.com or call 312-248-8530.