Why you need an SBA loan broker–Uncovering the truth

Do You Need an SBA Loan Broker to Buy a Business? Here’s the Truth

When you plan to buy a business with an SBA 7(a) loan and start navigating the process of loan application, you meet the intricate world of financing. Hence, this is considered the most strategic move an entrepreneur makes. This is where the question “Do I need an SBA loan consultant?” pops into an entrepreneur’s mind. We will uncover the truth regarding the need for an SBA loan consultant in this article.

You see, the SBA loan process can be overwhelming amid its complexities. It involves endless paperwork, financial reviews, strict deadlines, and extensive lender requirements, ultimately making it stressful. So, without proper guidance, you end up finding the loan navigation process intimidating, time-consuming, and frustrating. 

This is where you think of approaching an experienced SBA loan consultant to help you secure an SBA loan. No doubt, the services of an SBA loan consultant make a significant impact on the process. These professionals not just work as middlemen, rather they act as strategic partners throughout the process.

What is an SBA Loan Consultant?

An SBA loan consultant works as an intermediary between you and the lender. An SBA loan consultant is not a direct SBA lender; rather, they work as a bridge between you and the lender. Its role is to simplify the entire process—from the loan application to all the way to getting it approved. 

They help you get ready your loan package, match you with the right lender. They evaluate your deal’s size, debt service coverage ratios, stability of earnings profile, industry, understand your business nature, and how your background experience can add value to cash the deal. They also preemptively assess the business to help you avoid back-and-forth with the lenders.

What Do SBA Loan Brokers Actually Do?

An SBA loan consultant offers diversified services designed to support you at every stage of the process.

Here’s what they actually do:

• Evaluate your profile and business to make sure you qualify for the SBA loan eligibility and underwriting criteria
• Create an entire package of supporting documents, including financial statements, tax returns, projections, and borrower information
• They match you with the best lender that offers better loan terms
• Engage on your behalf with underwriting teams–communicating and responding to all of their queries and requirements
• Keep an eye out for any issues delaying the process and resolve them immediately to keep the momentum of the process
• Speed up the process by ensuring all the paperwork is ready

These SBA loan consultants could become a game-changer if you’re stuck at any stage of the process

Do You Really Need One?

There are scenarios when you should work with an SBA 7(a) loan consultant—and when you do not need them. Here’s a quick guide to see whether you need an SBA loan consultant:

When it's a good idea:

• It’s your first time applying for an SBA loan, and you’ve no idea about the SBA loan procedure and its steps
• Does the deal have any complications
• Faced rejection or ghosted by the banks
• You wish to maximize your chances of getting approved and closing faster

When it may not be necessary:

• You already have a good experience with a trusted lender
• You’re applying for a 7(a) small loan, and the business has clean financials
• You find it easy to do all the paperwork and engage comfortably with the lender

How to Choose the Right SBA Broker?

Not all brokers in the market have the expertise to make a successful deal for you. Therefore, choosing the right business acquisition SBA loan consultant is the key to a smooth transition from start to end. The choice of an SBA loan deal broker substantially impacts the success of loan approval and its timeline. 

We recommend choosing someone who has proven experience in SBA loans for business acquisitions, not those who only deal with real estate and general lending. Check out their versatile portfolio— the number of deals they have closed, the lender network they work with, and what their typical timeline looks like. Understand their pricing models since some brokers charge a flat fee and others work on success-based fees. 

Do not forget to check out their reviews, testimonials, and record of their successful closed deals. Communicate whether they offer consultations on loan terms, and deal structure, or if they just move your documents for submission.

What to Expect When Working With an SBA Loan Consultant

Once you have reached a decision to work with an SBA Loan broker, understanding the expectations when the engagement with them formally unfolds is important. Ideally, they start with a discovery call to know about your acquisition goals, financial health, and your intended business. At this stage, their purpose is to determine your eligibility. 

After you both agree to work together, they next ask you to submit the required documents. The next phase includes the preparation of your loan file. Once documents are submitted, the SBA loan consultant then matches your application with an SBA-preferred lender.

The next stage involves the underwriting process, where your broker engages with the lender and carries out the entire communication. Finally, they will sometimes make introductions (as appropriate) to financial due diligence providers, M&A attorneys, business insurance agents, escrow agents and life insurance agents, to ensure that things go well.

FAQs

Do SBA brokers get paid by the lender or buyer?

It depends. In some cases, they are paid by the lender; in other cases, they are paid by the buyer or both. So, always communicate upfront to keep your relationship with the broker healthy. At Pioneer Capital Advisory LLC, our services are 100% lender paid. Put another way, we get paid solely by the SBA lending institution after the closing and funding of your SBA loan and never charge you as the buyer.

Can a consultant also help with negotiations and deal structure?

Yes, but not like an M&A advisor. SBA consultants can advise on deal terms. This is typically done specifically to opining on what structure or structures will ultimately work from an SBA financing perspective. Typically, SBA loan consultants that are reputable will direct you to business valuation resources so that you as the buyer can make an educated determination on valuation.

What’s the difference between a loan broker and an M&A advisor?

The distinction between an SBA loan consultant and an M&A advisor lies in their areas of focus. An SBA loan consultant is dedicated to securing SBA financing and matching you with the most suitable SBA lender. In contrast, an M&A advisor assists with business valuation, formulates negotiation strategies, and supports the drafting of the purchase agreement. It is important to understand that some SBA loan consulting firms limit their involvement to making the lender introduction. Once underwriting begins, they step back entirely and play no further role in the process through to closing.

Pioneer Capital Advisory takes a fundamentally different approach. We are deeply involved in every stage of the deal process from beginning to end. When engaged prior to the submission of a letter of intent, we evaluate your SBA financing structure to ensure alignment with lender expectations. We also create a comprehensive deal deck designed to position your transaction competitively in the market and present it effectively to lenders.

Our involvement continues well beyond lender selection. We remain highly engaged throughout underwriting and the post-approval phase to ensure that every step is handled with diligence and precision, helping to drive the transaction to a successful close.

Conclusion

It’s no secret that without the best SBA loan consultant for acquisitions, you may get stuck and feel overwhelmed by the nature of the process. We’ve provided our recommendation on when to choose an SBA loan consultant and when not, depending on your experience. But, with the right choice of an SBA loan consultant, you stay relaxed, and all the work is carried out by the broker till the final stage—approval of the funding.

How Pioneer Capital Advisory can help?

With over 90 deals closed—we are a seasoned SBA loan advisor specializing in SBA 7(a) loan financing. Our dedicated team of professionals helps you close the deal without any hassle. From matching you with the right lender and building a flawless loan file to closing the deal for approval, we work closely with you to make the process a success. 

‍Contact us today to process your SBA financing request at the earliest!