Breaking Down The “Twin Cities Top SBA Lenders” List
How to choose the best Minneapolis-St. Paul bank of your SBA loan.
For those seeking to start, buy or expand a business – or, for those in need of refinancing – it can be hard to decide which bank is best suited to provide you with an SBA loan. I have sat across the table from many business owners struggling to choose the right financial institution to serve their needs.
Both large banks, also known as “megabanks,” and smaller community banks work with the U.S. Small Business Administration (SBA) on loans. It’s important to understand that some banks may be able to develop a financial package tailored to your specific needs, and some may not.
To help guide your decision, the Minneapolis/St. Paul Business Journal puts out “The List: Top SBA Lenders in the Twin Cities” each December. Banks located in the Twin Cities Metro are ranked by the number of SBA loans processed. If you’re looking for a loan, the list can be a helpful tool – though it’s essential you understand what the rankings mean and how it affects you.
Why the List Matters
Before we begin, it’s important to understand the difference between SBA’s two primary loan packages: 7(a) and 504 loans. Check out the article I wrote here if you need a refresher.
As far as the list goes, many consider it a helpful guide – thinking that the higher the ranking, the better the bank will be in advising and assisting you with the SBA loans. And that’s not altogether untrue. Experience goes a long way in creating an efficient and timely process for businesses looking to obtain a loan. However, from a banker’s perspective, the list itself does not tell the whole story.
To illustrate this point, let us look at the banks and corporations that rank in the top 15 of the 2018 list. I’ve broken it down in the table below. In addition to banks, you’ll also see CDCs, or certified development companies, on the list. These organizations only work on SBA 504 loans, which finance fixed assets such as real estate, buildings, and machinery – and importantly, they must partner with a bank to complete the loan. As an example, 21st Century Bank partnered with CDCs on 16 of the SBA loans in the top 15 list, and those 16 loans count toward the CDC’s ranking, not 21st Century Bank.
It’s important to keep in mind: just because an organization gives out a high number of SBA loans, does not mean that it’s the best decision for your short or long term financing goals.
How to Navigate the List
To work through the list, ask yourself the following questions:
Q: For those seeking an SBA loan, do you want to partner with a megabank or a community bank?
A: If your answer is megabank, then you can choose between the top-ranked: Wells Fargo or U.S. Bank.
Q: Do you want information on all SBA products, rather than just one loan type, to better understand your options?
A: If your answer is “yes,” I’d look to a knowledgeable banker for that information. The CDC’s, which include Minnesota Business Finance Corp., Twin Cities – Metro Development Co., Spedco and Central Minnesota Development Co. have expertise in SBA 504 product, however, for a small business to obtain an SBA 504 loan a CDC’s must partner with a bank, as stated earlier.
Q: Are you committed to partnering with a community, or locally-owned and operated bank?
A: Many business owners choose this option to benefit from the relationship-based customer service and investment in your community. If you’re of this mindset, then the list can be condensed to the following top 5:
There are a few things to note about this revised top 5 community bank rankings in comparison to the original Top SBA List. We excluded Klein Bank from this list, which was acquired by Old National in 2018 and is now part of a large regional bank. Moreover, we have added in the SBA 504 loans and combined the two to obtain the final rank.
Any of the banks on this list, 21st Century Bank included, should be able to competently share the benefits and drawbacks of each loan option – conventional, SBA 7(a) or SBA 504. Beyond that, they should be able to provide information on why this partnership would benefit you the most along with the products you’ve expressed interest in. They will also choose a CDC to partner with in the case of an SBA 504 loan.
I know the leaders of these banks in this revised list, and I can confidently say that you can’t go wrong with any of them. They all have lending policies, growth goals and lender advisors all geared towards helping businesses expand with SBA loan programs.
Taking the Next Step
I understand this process can be complicated for those who don’t live and breathe this industry as we do.
As you determine the financial needs of your small business, we want you to know that at 21st Century Bank, we are committed to being as a full-service resource for all stages of your business. You’ll have access to our team of advisors, who are ready to help you explore our business loan programs, including SBA along with business banking services. I share this information in hopes that it will help you make the best decision possible when it comes to funding your business, today and in the future.
I welcome your comments and perspectives if you care to share them and I look forward to an opportunity to discuss your small business lending needs. If you’re considering an SBA loan for your business, I invite you to talk with one of our lenders.
Article contributor: Jonathan Dolphin, President, 21st Century Bank