Become a Superhero SBA Deal Packaging Lord

When I first stepped into my role as an SBA loan officer, I immediately recognized that some business development officers just killed it and soared about the rest, while others lived in a middle ground of mediocrity. I wanted to know what set them apart. Was it just personality? Was it tenacity? This question was constantly on my mind, but my curiosity and passion led me to mine a few tips from these “superheroes” that have helped me to be successful, and honestly just enjoy my job more.

As a Business Development Loan Officer, your role in securing good credit for the bank is paramount. Getting those loans approved is the biggest hurdle that you can help the deal get over. To maximize your chances of approval from the bank’s credit team, it is essential to showcase qualities that set you apart, present a comprehensive loan package, anticipate potential pitfalls, and effectively navigate challenges. Below I want to share a few key factors that can level up your chances of obtaining SBA 7(a) loan approvals.

Setting Yourself Apart:

1. Become the Master of the Industry: Become a trusted advisor by developing a deep understanding of the industries you serve. Stay updated on market trends, regulatory changes, and the unique challenges and opportunities businesses in those sectors face. Invest time engaging in the worlds that you serve. Read the articles, ask questions, and dig up the data. Be curious and really take ownership of that knowledge by asking yourself the question, “Would I personally invest in this business/industry/individual?”

2. Strong Relationship Building: Cultivate meaningful connections with borrowers and bank staff alike. Show genuine interest in their businesses, actively listen to their needs, and provide personalized guidance throughout the loan process. This will deepen the connection with the customer and help you really understand how best to help their needs to be met. With your internal partners at the bank, seek to understand how each employee fulfills their role in the loan process. Ask them what their processes are, and how they like to communicate. Then ADAPT yourself to that process. Have empathy for their imperfections as you would hope they would act in response to yours.

3. Proactive Problem Solving: Display your ability to identify potential hurdles early on and propose viable solutions. Anticipate and address concerns before they arise, showcasing your commitment to facilitating successful loan transactions. Get input from others on your team. I spend an excessive amount of time picking the brains of the credit manager and closing team to try and understand what could go wrong, so that I do everything I can to prevent my transactions from reaching a hard stop.

Components of a Stand-Out Loan Presentation:

1. Detailed Business History and Narrative: Present a well-structured business narrative highlighting the borrower’s vision, market analysis, growth strategies, and financial history. Demonstrate a thorough understanding of the borrower’s industry and articulate how the loan will facilitate sustainable growth. Address the weaknesses and ensure you have a well developed mitigation argument. If you don’t find it, your underwriter will. Actually take the time to read over the business plan, purchase agreements, promissory notes, or other documents that back up the use of proceeds, and ensure the structure of the loan, seller carry, and injection, are all accounted for and not just something you discussed over the phone.

2. Financial Documentation: Include comprehensive financial statements, tax returns, and cash flow projections to demonstrate the borrower’s financial stability and repayment capacity. Transparently present historical financial performance, showing a solid track record and the potential for future success. Be conservative with add backs and stress test your deal with potential adjustments made in underwriting, i.e. hiring people to fill new roles, potential rate increases, property tax and insurance cost increases when they buy real estate, etc…

3. Collateral Evaluation: Conduct a meticulous assessment of the borrower’s assets and identify viable collateral options. Present a comprehensive analysis of the collateral’s value, showcasing its ability to mitigate risks associated with the loan. Use the free resources like Zillow or Realtor.com when taking secondary collateral.

4. Management Expertise: Highlight the borrower’s management team’s qualifications and track record. Showcase their industry experience, leadership capabilities, and their ability to execute the proposed business plan effectively. Finding relevant experience is more important than ever right now. The businesses that will thrive and survive in the current economic climate will be those that have shrewd and careful people running them. Ask the questions that an underwriter might ask to know if the borrower seems to know what they are getting into.

Common Pitfalls and How to Avoid Them:

1. Incomplete Documentation: Submitting an incomplete loan package can significantly hinder the approval process. Double-check all required documents and ensure they are accurate, up-to-date, and well-organized. Don’t kick back when you get asked for something that you might have missed. Just GET TO WORK! Stop demonizing those that you work for thinking that they are just trying to stop your deals from progressing. They are on your team and want the deals to be successful too, but have a different perspective than you. So see the deal through the credit teams eyes and you will be better prepared with your paperwork.

2. Lack of Financial Transparency: Failing to provide a clear financial picture raises concerns for the credit team. Ensure financial statements are accurate, consistent, and supported by relevant documentation. Don’t leave in out of date and irrelevant paperwork in your submission that raises questions on irrelevant data. Double check your balance sheets for missed liabilities, ensure that they balance, and question any odd expenses or line items that seem out of place.

3. Insufficient Collateral: Inadequate collateral coverage increases the lender’s risk exposure. Conduct a thorough collateral evaluation and explore alternative options to mitigate risks. Ensure that you have taken all available collateral per SBA policy, and set the expectation early with the customers on what assets might be at risk of being added to the collateral pool.

4. Weak Borrower Profile: If the borrower’s credit history, experience, or industry knowledge is lacking, it can be a red flag for lenders. Mitigate this by showcasing the borrower’s strengths, emphasizing growth potential, and providing additional supporting documentation. Liquidity, excess personal cashflow, stable cashflow history, and clear credit will always help overcome other weaknesses that surface.

Dealing with Dissapproval

1. Seek Feedback: When faced with disapproval and loan declines, reach out to the credit manager for feedback. Understand the specific concerns raised and identify areas for improvement. Use this feedback constructively to refine your loan presentations and strategies. The more grace and humility you have in your declines, the more successful you will be on future deals. To put a little spin on Ted Lasso’s line, I say, “Be curious, not confrontational with your credit team.”

2. Modify the Deal Structure: If a credit manager doesn’t like a deal, consider tweaking the structure or terms to address their concerns. Explore options such as adjusting loan amounts, collateral arrangements, or repayment terms to align with the credit team’s preferences. So many hours have been lost by BDOs chasing a pipe dream and trying to shove ten pounds of deal in a five pound bag. Find a spot that works with the bank and sell what they can get their head around.

3. Leverage Relationships: Cultivate strong relationships with credit managers and underwriters. Invest time in understanding their perspectives, maintaining open lines of communication, and proactively addressing any reservations they may have. A collaborative approach can increase your chances of success. The more time you invest in the study of your credit team’s appetite the more successful you will become.

As a Business Development Loan Officer, your ability to secure SBA 7(a) loan approvals hinges on your expertise, presentation skills, and adaptability. By setting yourself apart, delivering a comprehensive loan package, addressing common pitfalls, and effectively responding to challenges, you can maximize your success in obtaining approvals from the credit team. Remember, each disapproval presents an opportunity for growth and improvement. Embrace the journey, continuously refine your approach, and unlock the potential of SBA 7(a) loans for aspiring entrepreneurs and businesses. Good luck out there and take ownership of every deal you touch!