What FRANdata Thinks

9 Key Takeaways Lenders Want You to Know

November 8th, 2023 by Edith Wiseman


SBA lenders have been faced with unprecedented changes in the way they finance SBA loans.  These changes are unwelcome and, for the most part are causing significant uncertainty for both lenders and borrowers. The key takeaway for you as franchisors are to do whatever you can to help provide lenders certainty and speed because they have less control over the timeline, and as they described it, their preferred lending status has been inadvertently been taken away from them with the new SOP that was released by SBA.   FRANdata is rolling out its certification of franchise eligibility to help Franchise Registry members provide certainty to lenders around franchise eligibility

Updates from the latest NAGGL Conference (the largest SBA Lending conference of the year)

Challenges in SBA Business Economics:

  • Rising costs in staffing and capital are impacting the economics of SBA lending businesses.
  • Three institutions have recently eliminated their SBA departments.
  • Repayments and refinancing out of SBA loans have negatively affected secondary market premiums which reduces the amount of capital an SBA department has to lend and makes it less profitable.

Eligibility and Application Process:

  • SBA took over the eligibility process from lenders. HOWEVER, in the newest SOP it tells lenders that they can’t submit a loan that they know is ineligible.
  • SBA acknowledges that there are gaps in their ability to vet eligibility
  • SBA lenders want the Franchise Directory back.
  • The process of determining eligibility remains a key challenge for lenders.

. Lenders Are Anticipating a Mild Recession:

  • Lenders foresee a mild recession in the second quarter, emphasizing the need for vigilance.
  • Lenders are comparing performance against 2019, which will discount COVID bumps in any business performance

Documentation and Eligibility Checks:

  • The upcoming release of Form 1919 in mid-December promises to provide clarity, barring any government shutdowns.
  • Understanding the specific eligibility checks outlined in Section A, Chapter 1, remains crucial for SBA lenders.

Record-Breaking SBA 7(a) Activity:

  • In November, a new acting director stepped in after Diana Seaborn’s move to the Office of Financial Literacy.
  • SBA 7(a) activity hit an impressive $27.5 billion, setting a record, excluding stimulus-related activity.
  • Small dollar loans are on the rise, with 28,745 loans, particularly in the growing SBA Express program.
  • Conversely, 504 loans have seen a decline.

Changes to SOP and Risk Mitigation:

  • There is a call for adjustments to the SOP, particularly in the context of risk mitigation measures.
  • Some lenders feel that PLP authority has been somewhat restricted, sparking a strong reaction from the audience.

Interest Rates and Borrower Requests:

  • Interest rates have seen an increase, leading borrowers to seek relief. However, past dues have not yet been significantly affected.
  • More upgrades than downgrades are being observed in loan portfolios.

Borrower Demand in Flux:

  • Borrower demand has experienced fluctuations as businesses adapt to the “new normal”.
  • The first and second quarters saw a slowdown, potentially linked to the conventional pullback.

Equity Injection Verification and Earnest Money:

  • Welcome changes in the verification of equity injection have been noted.
  • Concerns have been raised regarding earnest money, as borrowers face potential losses in case of delays or errors from the SBA.


SBA lenders are experiencing a lot of changes which is creating uncertainty in the lending process for the lenders and for borrowers.  Lenders feel like their preferred lender status has been taken away from them and creating bottlenecks. It has become very important that anything that can provide speed and certainty be implemented in the process in order to breakdown barriers for franchisees to get financing

Archived by Category