Learn how to find the right lender for your SBA 504 loan request

Finding a lender for your SBA 504 loan request is critically important. Of course, you must choose a lender carefully when taking out any form of loan. 

However, with an SBA 504 loan, things are a little different because you not only have to deal with one lender, but two: Your first lien (typically a bank) and your second lien, the CDC loan guaranteed by the SBA.

Further, you can only engage with a lender who accepts payments from the CDC you are now using. This means that the lender and CDC have typically already established a working relationship and have decided to collaborate to assist small businesses in obtaining the capital they need for expansion and success.

It should be noted that this isn't always the case. Regarding an SBA 504 loan, you are free to speak with any lender you like. But not all lenders are eager to participate in this initiative, and not all lenders will be eligible.

In other words, you're not compelled to pick one of the thousands of lenders in the nation. Instead, you can pick a lender from the partners the CDC you use suggests are accessible. Naturally, this means that picking the best CDC is essential.

The lack of greater flexibility in your lender selection is due to a single factor. It's because of how SBA 504 loans three-party loan structure functions (you, the bank, and the CDC). While both the traditional loan partner–the bank–and the CDC have different lending policies, they must cooperate during the underwriting process to remedy any issues. The bank and the CDC must agree to underwrite the loans. Along with coordinating loan terms and conditions, the bank and the CDC must also affirm that all SBA 504 loan program requirements have been met.

Having said that, there are a few things you should take into account when finding a lender.

Finding a Lender for your SBA 504 loan

Go Local: It is frequently preferable to hunt for a local bank or credit union that is SBA-approved and ready to cooperate with the SBA 504 program. This is because SBA 504 loans and CDCs are hyper-focused on the impact your project will have on the local economy and business landscape. The $15 billion made available to US states through the State Small Business Credit Initiative may also be useful to you. You may find out more about this effort and the participation of your state here, however not all 50 states take part.

It's critical to keep in mind that only qualified lenders can participate in the SBA 504 program. 

Certification/Preferred Lenders: Therefore, one of the first things you should search for on a bank or credit union's website while comparing your options is SBA approval. Your neighborhood SBA district office can provide you with a list of SBA-approved lenders to assist you. Not sure about its location? You can research it here.

Tools: Although the SBA no longer offers its SBA Direct online lender lookup service, you can still use the company's website to assist you in locating lenders in a sideways or indirect manner. To find lenders who might meet your needs, start here.

To learn more about Certified Development Companies (CDCs), click here and here. The SBA has a great “lender match” tool you can use here. There is also a great list of small business lenders here.

Of course, your best bet in finding a lender for your SBA 504 loan is a qualified and experienced commercial loan broker.