As a small community bank, you play a vital role in supporting local businesses. Despite tighter lending standards, SBA loan volume is at a 34-year high. From January to April 2025, the U.S. Small Business Administration approved nearly 45,000 loans. Most of them were under $500,000, and over half were under $150,000. 

With SBA loan applications increasing, more community banks are seeking to expand their SBA portfolios and secure a greater share of this growing market. But to do so, it’s best to understand what the best SBA lending platforms can offer your community bank. 

In this article, we’ll take a look at the common challenges community banks face in small business lending and strategies that can help unlock SBA lending success.

Understanding SBA Loans

The SBA has several small business loan programs, including:

  • SBA 7(a) loans
  • SBA 504 loans
  • SBA Express Loans
  • SBA Microloans

The SBA 7(a) is the most popular of its loan programs, with a maximum loan amount of $5 million. SBA 7(a) loan funds can be used:

  • To refinance business debt
  • For working capital
  • To refinance, purchase, or improve commercial real estate
  • To purchase equipment, furniture, fixtures, or supplies
  • To purchase a business (change of ownership)
  • For multiple purposes, including the above

Benefits of SBA Lending for Community Banks

Business owners seek small business finance for various needs. SBA loans benefit entrepreneurs by offering financing at lower interest rates and down payments and better loan terms than other loan products.

SBA lending also offers many strategic benefits for community banks wanting to build a stable and profitable loan portfolio.

1. Reduced Risk Through Government Guarantees

A huge advantage of SBA loans is that they are partially guaranteed by the federal government. The SBA guarantees up to 75% of SBA 7(a) loans over $150,000 and up to 85% of loan amounts that are $150,000 and less. 

So, a bank can approve more loans without significantly increasing its risk. And if you use one of the best SBA lending platforms available to you, you can increase your loan volume without substantially increasing your bank’s risks.

2. Stronger Business Relationships and Support for Local Economies 

Small businesses are integral to a growing economy. SBA loans put more capital into the hands of small businesses. 

This helps support small business owners during critical growth stages, whether to expand into a new market, hire new staff, boost cash flow, or purchase equipment. 

Facilitating these business needs is not only good for entrepreneurs and the economy. It’s good for your bottom line. Successful lending relationships often lead to long-term loyalty, increased customer retention, more deposits, and higher revenues. 

3. Competitive Positioning 

Large banks and fintech companies tend to dominate the market. This can make it hard for community banks to stand out. 

But offering SBA loans and incorporating the best SBA lending platform into your workflows can make a difference. It can help set your bank apart by appealing to underserved small businesses in your region. 

Small business owners often struggle to get funding from larger lenders because of rigid eligibility requirements. However, businesses are more likely to qualify for a loan with SBA-approved lenders.  

Common Challenges Facing Community Banks

SBA lending can be a game-changer for your community bank. However, some banks find it difficult to implement an SBA platform. Here are some common challenges.

Complicated Processes

With SBA lending, banks must understand the SBA’s eligibility requirements and deal with extensive documentation and complex regulations. Without experience or a specialized system to navigate these hurdles, it can overwhelm some banks and their staff.

Slow Processing Times

Many community banks still operate with manual workflows. Traditionally, it wasn’t unheard of for SBA loans to take three or more months from application to funding.

But the modern lending environment is fast-paced. It’s essential to meet the demands of today’s small business owners by increasing the speed and efficiency of the SBA loan application process. With automation and digital tools, the best SBA lending platforms can reduce the application and approval process from months to days. 

By becoming an SBA preferred lender, you can expedite loan approval and have funds to borrowers much quicker than regular SBA lenders.

Limited Resources

Smaller banks often have time and technology limitations. This can make it difficult to manage the added workload of servicing SBA loans. Many community banks also lack staff members with extensive knowledge of SBA loan processes, underwriting standards, and servicing protocols.

Risk Management

Reducing risk is essential in the small business lending industry. This is especially true for SBA lenders, who must follow strict rules to keep a government guarantee in place. 

A tiny error in documentation or missing any of the SBA’s guidelines can jeopardize the SBA guarantee. This can increase the financial risks to your bank. 

To manage risks, banks need the right systems, training, and oversight in place to avoid costly errors and ensure long-term success. Thankfully, the best SBA lending platform can integrate into the SBA’s system to ensure every SBA requirement is met.

Tools for the Best SBA Lending Platform Success

The best SBA lending platforms are successful because they allow financial institutions to scale and serve more small business owners. Digital tools and cloud-based platforms are what make scaling possible because they make SBA lending more efficient. 

SBA Loan Origination Software

Your community bank can manage the increased demands of SBA lending more efficiently with SBA loan software. The best SBA lending platforms automate key steps in the lending process, from the loan application and underwriting to approval and closing. 

SBA lending software improves the overall efficiency of the loan process. It also enhances data accuracy and regulatory compliance. 

AI Enhanced Analytics 

The best SBA lending platforms use advanced data analytics and artificial intelligence (AI) to optimize the loan process. 

An AI-powered platform gets data from multiple sources to assess a borrower’s credit score and financial behavior. It can also look deeply into market trends. 

Together, these insights can identify potential risks and the chance of a loan default.

CRM Systems 

Customer Relationship Management (CRM) Systems are programs customized to help financial institutions manage their new and existing client relationships. CRM software can offer tools to track communication, manage leads, enhance marketing efforts, and ultimately increase revenues. 

Other Strategies for SBA Lending Success 

To succeed with SBA lending, banks need to partner with the right people, tools, and processes. Here are some things to consider doing:

1. Build a Dedicated Team

Before implementing SBA lending programs, community banks should invest in employee training for regulatory compliance and risk management. Training should extend to any SBA loan software your bank adopts for its SBA lending platform.

2. Leverage Technology

Staying competitive in the SBA lending space is easier when banks embrace technology.

  • Explore loan origination systems that support streamlined SBA workflows and include a digital portal for borrowers. This can enhance the client experience and foster long-term loyalty. It can also make document submission and the loan process easier and faster.
  • An automated platform that prioritizes compliance is also essential. Choose the best SBA lending platform that fits your bank’s system, workflow, and needs. 
  • Look for a platform that customizes to your bank’s specifications and allows you to determine the level of automation you want.

3. Partner With SBA Experts

It’s vital to choose a Fintech leader when evaluating SBA lending software. A leader like Biz2X is world-class in its field and has strategic partnerships with the top technology companies to reduce risks to banks. The partnerships enable banks to deliver the fast loan decisions and approvals that today’s business leaders demand. 

Future Opportunities in SBA Lending

The future of SBA lending offers strong growth potential for community banks willing to adapt and innovate. The best SBA lending platform for your bank’s needs can maximize efficiency and diversify its lending portfolio. 

The SBA continues to modernize its systems with new digital tools designed to speed up approvals and improve funding access for small business owners. The best SBA lending platforms update themselves regularly to keep up with the SBA’s system. 

With newer innovations, the SBA loan process is expected to become even better for both lenders and small business owners. 

In terms of market opportunity, emerging sectors like green energy, minority-owned businesses, and startups are gaining attention. These groups need flexible financing options, and SBA loans are key. Community banks are in a great position to serve these borrowers. A more inclusive portfolio minimizes risks for lenders through varying economic trends and stages of growth.

By staying informed of SBA policy updates and catering to growing markets, your bank can strengthen its role as a trusted advisor to small business owners. With the right strategies in place, your community bank can lead in the next wave of SBA lending success.

FAQs

What is an SBA lending platform, and why does my community bank need one?

Manual underwriting is no longer enough in today’s digital lending environment. Small business owners now expect fast, online loan options. The best SBA lending platforms meet these expectations by streamlining the loan process and making compliance easier, creating an ideal solution for community banks with limited staff and resources.

What features should banks look for in the best SBA lending platforms?

The best SBA lending platforms integrate with the SBA’s system and have AI-powered analytics, digital portals for borrowers, and compatibility with your bank’s existing systems. You should be able to customize it to fit your bank’s processes at automation levels your bank is comfortable with. CRM capabilities are also important.

How does SBA lending software improve the borrower experience?

Today’s small business owners expect to be able to do almost everything online. The best SBA lending platforms have digital portals that allow borrowers to easily upload documents, track their loan status, and communicate with their loan servicing team. This reduces wait time and offers a smoother loan experience. 

Can SBA loan software help with meeting compliance?

The best SBA lending platforms come with built-in compliance tools that flag missing documents and guide staff through SBA rules. This helps reduce errors and ensures your bank meets the requirements to maintain its SBA loan guarantees. It also simplifies the audit process, making your bank better prepared and more efficient.

Are all SBA lending platforms scalable for each individual bank?

The best SBA lending platforms are built to scale as your bank grows. Whether you want a huge portfolio of SBA loans or just a few, many systems will adapt to your bank’s needs. Just remember to choose a proven SBA lending solution that will meet all your specifications. Find out how BayFirst Financial became a top-five SBA lender after expanding its SBA program by leveraging Biz2X’s loan origination system. Then request a demo to learn what Biz2X’s platform can do for your bank.