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The Small Business Administration (SBA) loan programs are a vital resource for small businesses seeking financing. However, these programs also offer a host of benefits for lenders, making them an attractive option for financial institutions looking to expand their lending portfolios. By participating in SBA loan programs, lenders can enjoy increased loan volume, reduced risk, community impact, and competitive advantages. Here’s a closer look at how SBA loan programs benefit lenders, as well as some ways that AXIS by AIO Logic uses AI and automation to help lenders optimize their lending processes!

Increased Loan Volume

One of the primary benefits for lenders participating in SBA loan programs is the potential for increased loan volume. By partnering with the SBA, lenders can offer loans to a broader range of clients, including startups and businesses with limited credit history. This expansion of the client base can lead to a significant increase in the number of loans issued, boosting the lender’s overall business. Each of the SBA’s programs (including 7(a) loans, 504 loans, and microloans) targets specific segments of the small business community, enabling lenders to diversify their loan portfolios and cater to a wide array of financing needs.

As lenders partner with the SBA and begin to increase their loan volume, it’s crucial that they originate loans in an efficient manner. This efficiency can easily be achieved thanks to AXIS by AIO Logic, which has AI features that are purpose-built for the commercial lending industry. Broadly speaking, the AI within AXIS automates complex workflows across a broad range of commercial loan structures, while also analyzing workflows to identify bottlenecks and inefficiencies. More specifically, AXIS has origination features such as AI-powered loan generation which allows users to enter a simple prompt and have the initial loan set-up details auto-generated.

Reduced Risk

A key advantage of SBA loan programs for lenders is the reduction of risk. The SBA provides guarantees on a significant portion of the loan amount, which can range from 50% to 85%, depending on the specific loan program and terms. This guarantee minimizes the risk exposure for lenders, making it safer to extend credit to small businesses that might otherwise be deemed too risky, as the lender is only responsible for a small portion of the loss in case of a default by the borrower. This risk mitigation encourages lenders to offer more loans and support small businesses, fostering economic growth and stability.

While the government-backed guarantees on SBA loans greatly reduce the risk exposure of lenders, there are still ways in which AXIS by AIO Logic can help lenders reduce risk even further. One such way is through our powerful credit scoring and risk assessment capabilities. As part of these capabilities, AXIS’s AI analyzes a wide range of data points (e.g., financial statements, transaction history, market data) to assess the creditworthiness of borrowers. Additionally, AXIS can identify patterns and risk factors in financial, collateral, and loan data to proactively manage risk by identifying early warning signs.

Competitive Advantage

Offering SBA loans can provide lenders with a competitive edge in the marketplace. In an environment where small businesses are often looking for the best financing options, the ability to offer SBA-backed loans can set a lender apart from its competitors. These loans typically come with favorable terms, such as lower down payments, longer repayment periods, and lower interest rates, making them an attractive option for borrowers. By having SBA loan programs in their product lineup, lenders can attract more small business clients and establish themselves as preferred financial partners for these businesses.

For lenders who are willing to offer borrowers customized loan structures and terms to suit their needs, AXIS by AIO Logic has native handling for every commercial loan structure, including amortizing, revolving, ABL, delayed draw, interest only, and many more. AXIS also has robust functionality for interest rate structures, with independent functionality for Current and PIK interest as well as simple and compounding interest. Plus, AXIS allows users to utilize variable rate structure, with users choosing the desired index, index calculation, and desired margin. Once those parameters are set, the applicable rate calculation is entirely automated.

Enhanced Relationships with the SBA

Participation in SBA loan programs foster a strong relationship between lenders and the SBA. This relationship can be highly beneficial, as the SBA provides extensive resources and support to its lending partners. Lenders receive training, technical assistance, and access to the SBA’s network of Small Business Development Centers (SBDCs) and SCORE chapters, which can help them better serve their clients. Additionally, the SBA regularly updates and improves its loan programs, offering new opportunities for lenders to expand their services.

In addition to the resources and support that they receive from the SBA, lenders in the SBA program can utilize powerful technology such as AXIS by AIO Logic to enhance their operations. As the only AI-powered, end-to-end solution capable of managing the complex requirements of commercial lending, AXIS is uniquely positioned to optimize the operations and processes of SBA lenders. From unprecedented automation and analytics to top-class security and document management, AXIS has everything commercial lenders need to take their operations to the next level.

Conclusion

SBA loan programs offer numerous benefits for lenders, from increased loan volume and reduced risk to positive community impact and competitive advantages. By participating in these programs, lenders can diversify their portfolios, mitigate risk, and support the growth of small businesses in their communities. Moreover, the enhanced relationships with the SBA and the ability to offer attractive financing options further solidify the value of SBA loan programs for lenders. As the small business landscape continues to evolve, SBA loans remain a crucial tool for lenders seeking to expand their reach and support the backbone of the American economy. If your firm currently offers SBA loans, is seeking to become an SBA lender, or simply wants to optimize its commercial lending operations, we invite you to contact us today to schedule an intro call and learn more about purpose-built AI features that AXIS has to offer!