Stay with me on this one! The SBA has a couple dominant designations for lenders and it’s important for my readers — bankers, borrowers and consultants — to understand their differences.
Love you all.
A PLP license stands for Preferred Lender Program. These are the Bruce Lee’s — you know, black belts! Generally speaking they are well staffed, well trained, go to the National Association of Government Guaranteed Lenders (NAGGL) conferences for purposes other than travel to arid climates during cold weather.
I like to explain that PLPs act like an extension of the SBA. Their files are thorough. They have internal oversite. Their mission is to have air-tight guarantees that will stand up to SBA scrutiny. PLPs often refer to themselves as production shops: meaning they’re built for speed. Get them in, box them up and ship them out! Special orders are out of the question!
Preferred lenders sell fast closes; fast results. When I was with one PLP we guaranteed closings in 30-45 days. And they could do it! I often bet my borrowers that if I couldn’t close that fast I would come to their closing in a cocktail dress.
Never had to, and I am sure no borrower would have wanted that image burned in their brain!
The PLP license does have limitations. If the loan request is outside of the boundaries stipulated by the SBA, the choice is to defer to the SBA for the decision. This is called Certified Lender Program.
A good example of what I’m talking about would be a business acquisition. A Preferred Lender is restricted on the terms of borrower injection and/or seller financing. A Preferred Lender looks for deals that can comfortably fit into structures of 75/25 or 75/10/15, as an example. But never is the amount the bank funds greater than 75%.
I have dealt with plenty of borrowers that could not negotiate the above structures. Not every borrower and or seller is prepared to put up that type of money.
Enter The Karate Kid!
So white belts, generally speaking, are newer to the program. They need lots of hand holding to get through the steps. And it becomes a business choice for those banks to operate under this model. They are not confident in their knowledge or training on the program and prefer to defer their authority to the SBA. Many banks entering the program find this a safe way to get experienced in the program — like eating sushi made from vegetables and cooked shrimp instead of octopus and sea urchin. Ick!
The good news is that whereas a Preferred Lender would look down their nose at a request that does not fit their formula … white belts will often welcome them with open arms.
And this too is a win/win. Just be prepared! GP lending is not for those who believe in instant results!
Banks that are GPs are best served by taking the Guru’s advice. When the borrower asks, “When will we close my loan?” The response is, “When it does.”
Namaste…..peeps.
Not All SBA Lenders Are Created Equal.
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