Best Practices for Efficient Sales on the Secondary Loan Market

It’s always a great moment when an SBA loan closes. With every deal, you know that your financial institution has done a service for a small business owner in your community while building your bank’s small business lending portfolio. And for many lenders, the next great moment is the sale of the guaranteed portion of the SBA loan on the secondary loan market.

Use this guide to avoid common delays and get you to that end goal more efficiently and effectively.

Best practices for SBA loan sales on the secondary loan market

It’s a scenario your institution knows well: An SBA loan closes and a borrower receives their funds. Then, you’re ready to move quickly to the next phase – the sale of the guaranteed portion of the SBA loan on the secondary market.

The question is, “What can you do to ensure more efficient secondary market sales?”

The answer is, “Begin the loan closing process with your ultimate end goal in mind!”

The best way to do that is to ensure that the booking documents for the closed loan are circulated, completed, and submitted to your loan service provider right away. This will help your team achieve a quicker secondary loan market sale for the guaranteed portion of your SBA loan.

Step-by-step guidance for the SBA loan closing process

The first step to a faster secondary loan market sale is an efficient closing. Once the closing is completed, the following will need to be circulated from the Closing Counsel:

1. The signed SBA Authorization (the SBA’s list of the specific conditions that must be met by the lender for the SBA to guarantee the loan); signed SBA 327s (if any) and signed internal modifications (if any)
2. The fully-executed note (the promissory agreement that outlines the legal obligations of the lender and the borrower)
3. A completed and signed W9: The standard IRS form used to request taxpayer information.
4. All necessary SBA Form 159s: The form is used specifically to disclose any fees and compensation that your institution or third parties have charged borrowers to use their services.
5. Completed and signed Settlement Statement (SBA Form 1050)
6. Copies of any HUDs or Authorizations for Disbursement, together with all supporting invoices, documents, and evidence of payment (copies of checks or wire confirmations) detailing how the loan proceeds have been disbursed

It’s essential that your LSP receive these items immediately after the loan closing so that the loan can be booked and moved to the next stage of finalization: Multiple disbursement of the loan or sale on the secondary loan market.

And it’s really that simple, too: By following this practice, your institution can avoid delays and move quickly on to secondary market sales.

Best practices built from experience

As an experienced and leading lender service provider, Prudent Lenders makes it easier for your financial institutions to immediately and effectively offer the benefits of SBA loans to your small business clients. You can rely on our team’s decades of experience in SBA lending, loan processing, and servicing to offer SBA loans without the costs of an in-house department.

With our clear processes, you’ll avoid unnecessary delays and challenges at every point in the SBA lending process. And by working together we’ll ensure that you can obtain and maintain your loan guarantees, which makes SBA lending easier for you. Here’s what you’ll find when working with Prudent Lenders:

• The proprietary Fast Track Assessment tool. This will help you and your clients quickly assess whether they’re eligible candidates for SBA 7(a) loans before either you spend a lot of time and resources on the process.
• Guidance throughout the application and underwriting processes to ensure that the SBA’s 7(a) documentation requirements are met at each step.
• Closing assistance, so that deals stay on track and SBA guarantees to lenders are upheld.
• Servicing, so that SBA requirements are met throughout the life of each loan. This keeps your bank in compliance while alleviating the time and resources needed to have your own, in-house SBA team. 

Contact us today for additional guidance and support

Want to learn more about how Prudent Lenders can make it easier to build your small business lending portfolio. When you work with us, you’ll strengthen your standing as a trusted resource and proactive small business lender in your community.

And if your financial institution isn’t one of our lender partners yet, get in touch and learn more about how we can help your team begin or expand your SBA program for your community’s small businesses.