What to know about multi-million SBA 7(a) loans to Wealth Advisors
How common multi-million loans are in SBA 7(a) lending
All-time, all lenders, for all industries, there have been over 24,000 multi-million loans approved in the SBA 7a program. For the wealth management industry there have been 145 approved all-time.
Over the last 12 months there were 460 lenders who approved over 2,700 multi-million SBA 7a loans for all industries, but only 4 lenders approved 26 multi-million SBA 7a loans in the wealth management industry.
The larger the loan amount you go, the fewer SBA lenders there are. Even the >$350K loan size takes out most of the SBA lenders in the wealth management space.
Over the last 12 months ending 9/30/2020, 60 lenders approved SBA loans for wealth management advisors. Of these, 24 (40%) approved a loan over $350K. Of these, 16 (26%) approved a loan for over $1 million, of which only 4 (0.06%) approved at least one multi-million SBA loan.
Over the last 20 years there have been only two lenders who have approved more than 3 SBA 7a loans to wealth advisors. In short, SBA lender experience is not widespread when it comes to multi-million loans to wealth management industry advisors and advisory firms.
Multi-million SBA loans are usually for acquisitions
Loan purposes for multi million SBA 7a loans can include debt refinancing and commercial real estate, but the overwhelming majority are for acquisitions.
Sometimes an advisor will have an existing conventional loan in place that gets refinanced and rolled into a new SBA acquisition loan.
When advisors are in a position to be seeking a multi-million dollar SBA 7a loan, it is almost always for an acquisition. And not just any acquisition. These loans usually mean the acquisition will be adding significant revenue to the buyer. These are the prime acquisition deals that are harder to find and even harder to get.
For advisors who aren’t in the “Billion AUM Budget Club”, these are coveted acquisitions. The consequences of the SBA lender selection are much different for multi-million acquisition loans than for a $200K working capital loan.
Which SBA resources should be considered for your multi-million loan?
In our opinion, SBA experience, expertise and appetite for multi-million loans specifically to wealth management advisors should be the requirement trifecta for an advisor’s due diligence on lenders.
In wealth management industry lending, there are only two lending options that offer this trifecta, Live Oak Bank and AdvisorLoans. The most recent SBA FOIA data goes through 9/30/2020. Up to this time, Live Oak Bank and AdvisorLoans are the only two SBA lending resources that:
Has even had a multi-million loan approval to an advisor every year for each of the last 5 years.
Has had more than 3 multi-million loans to advisors, ever. AdvisorLoans has 20.
When an advisor has an important acquisition big enough that it requires a multi-million SBA loan, the only two SBA resources that offer the “SBA requirement trifecta” should be where advisors start their due diligence with.
Most SBA lenders don’t approve multi-million loans to wealth advisors
Loan officers / business development people with a SBA lender or loan broker might be quick to tell you they can get your multi-million SBA loan done. But it’s the bank’s credit and committee teams that makes the approval decisions, not the salespeople. We’ve worked with several different SBA lenders on these larger size loans. The truth is, for most SBA lenders, multi-million loans to wealth advisors are hard to get approved.
Less than 1% of the SBA lenders that have approved loans to wealth advisors over the last year have done so for multi-million loan amounts. For all but two lenders, no SBA lender has ever approved more than 3 total multi-million loans to wealth advisors (through 9/30/2020).
Most SBA lenders have additional requirements that kick in on million and/or multi-million loan amounts. The loans typically under a magnifying glass are now put under a microscope. Because so few lenders have approved and funded multi-million SBA loans to wealth advisors, most committees don’t have the familiarity and comfort level they do with other industries.
The fact is, most SBA lenders don’t even focus on loans north of $350K. This is especially true in the wealth management industry. When SBA lenders approve multi-million loans it is usually in industries where a substantial portion of the loan is backed by traditional collateral, and also usually includes seller financing being involved.
Most SBA lenders are uncomfortable with multi-million loans in the wealth management industry where there is little, if any, traditional collateral. Then when some of these SBA lenders do approve a multi-million loan, they may require things another more seasoned SBA lender would not require for the same loan. These include a cash down payment from the borrower or require a portion of the purchase to be in seller financing.
The advantages advisors have using AdvisorLoans for multi-million loans
AdvisorLoans offers wealth advisors and wealth advisory firms the experience and expertise for multi-million SBA loans. We have consistently been a top SBA lending resource for multi-million loans to advisors for the last 5 years and YTD through 9/30/2020, AdvisorLoans represents 50% of SBA 7a multi-million loans to advisors.
AdvisorLoans offers an independent perspective for independent advisor clients. We’re able to help our clients with the ideas, structuring, and sometimes the workarounds, to get multi-million SBA loans approved, and approved with the most ideal structures. We are able to advocate to credit and committee members and are experienced in navigating these loans to successful funding.
Another AdvisorLoans advantage is that we are able to qualify our clients for about 50% more lending dollars than what most other multi-million loans outside of AdvisorLoans receive. This difference comes from varying minimum debt service ratio requirements and allows us to get bigger loan amounts approved for the same loan.
Because we have completed so many, there is familiarity and comfortability with our SBA lending partner(s) that most of our multi-million SBA loans are funded with 100% bank financing (no down payment and no seller financing). We’re able to structure any hold back amounts for a clawback through an escrow agreement.
We have SBA lending partners that for AdvisorLoans clients, will go to the SBA’s minimum requirements. This gives us the ability to get multi-million loans approved that most other lenders just won’t do.
For qualified borrowers, we can combine a SBA 7a loan with a conventional loan with the same lender to get an acquisition funded up to $8 million without additional committee obstacles to overcome.
AdvisorLoans services are free to our clients. Get an outsourced multi-million lending expert on your team today.
SBA DATA SOURCE AND METHODOLOGY
NAICS Industries
The NAICS national industry codes for Wealth Advisors/Investment Advisors/Financial Advisors that SBA lenders overwhelmingly use is Investment Advice (NAICS code 523930), and to a much smaller degree Portfolio Management (NAICS code 523920), and fewer still Securities Brokerage (NAICS code 523120). We combined all three industry codes to represent “Wealth Advisors”. For detail descriptions of these industries see FAQ SBA Lending
Data Source
The original source of SBA loan data on this page is derived from data released by the U.S. Small Business Administration (SBA). The SBA collects individual loan data from the SBA lender/bank approving and providing SBA loans. Loan approvals that were later cancelled are filtered from the loan approval data.
Data Integrity
As with most big datasets, the U.S. Small Business Administration (SBA) reported data is imperfect, relying on a bank representative to accurately input the data that the SBA then makes public through the FOIA (Freedom of Information Act) requirements. Sometimes data points can have an erroneous entry due to human error. The content however is developed from sources believed to be providing accurate information. Lenders do frequently update information on loan status but updated data isn’t shown until the following quarterly SBA data release(s).
No Warranty of Data Accuracy or Completeness
AdvisorLoans does not validate or verify the data released by the SBA. AdvisorLoans is only able to verify AdvisorLoans SBA lending data and does not make any representation as to the completeness or accuracy of the SBA loan data reported for SBA lenders.