The Small Business Administration’s Small/Rural Lender Advantage (S/RLA) SBA rural business loan program is part of the agency’s traditional 7(a) loan guarantee program that was designed to accommodate the challenges of small community lenders. During the financial crisis, traditional SBA lending dramatically dropped off which resulted in forcing the SBA to find new ways to remain relevant to their mission. This program encourages smaller and/or rural lenders which include lenders making 20 or fewer SBA loans a year, to offer SBA loans by streamlining the SBA’s loan application processes, procedures and compliance requirements. The traditional SBA process is very paperwork heavy and at many banks the president is the business loan officer leaving very little time to stay on top of the SBA requirements which are critical in keeping the guarantee in place.
SBA rural business loans are available for businesses in small and rural communities up to $350,000. The SBA provides an 85% guarantee on loans valued at $150,000 or a 75% guarantee for those loans valued at more than $150,000.
How It Works
The SBA rural business loan will go through the same bank evaluation process as the 7(a) meaning they still have to do their due diligence and the project still needs to be viable. What sets this program apart is there is only a two sided application for very small loans under $50,000 and some minimal additional information required for loans above $50,000.
The other key feature of this program is the speed of approval. Loans are expedited and processed through the SBA’s 7(a) processing center. In most cases, loans are processed within 3-5 days which is much faster than the 30-90 you would expect through the 7(a).
The owners of a farm supply store contacted us and they needed some additional capital to purchase a competitor in a close community. The financials from the company to be acquired weren’t stellar but there was so much potential just by cleaning up the operations. The acquiring farm supply store had a great reputation with the bank, but like many banks during the recession, they were reluctant to make a loan since the future was so uncertain. We introduced the bank to the Small Rural Lender Advantage program and were able to show how little exposure they would have for a project this strong. The bank signed up and were able to fund the project.
Why Get a S/RLA Loan?
This is a great program for smaller loans if the lender is having trouble being able to make a loan in-house. The speed of approval makes this a good option compared to other loan guarantee products.
Where To Find
Most small banks are eligible for the SBA rural business loan program provided they are in good standing with the SBA and processed an average of 20 or fewer SBA loans over the last three years. Here is a link of currently participating SBA rural business loan lenders http://www.sba.gov/content/rural-lenders