Out-of-State Banks Dominate SBA Lending
Out-of-State Banks Dominate SBA Lending
72% of funded SBA 7(a) loans over the last year (FY 2024) were funded by out of state lenders. Out of state lenders were responsible for even a higher percentage of franchise lending with 81% funded franchise SBA loans.
SBA lending volume is dominated by out of state bank lending and always has been. Out of state loans are defined as a loan where the bank state is different than the project state the loan is being funded for. A bank located in Florida funding an SBA loan for a project in Colorado for example.
While business owners would generally prefer to utilize their existing bank for their business loan, chances are the best matched banks for you and your loan is not your current bank.
We have 4 key criteria for making the right match with the right bank (experience, focus, criteria and familiarity) and being an in-state bank isn’t one of them. We don’t include geographic locality as one of the key criteria for an ideal business lender. SBA lending is its own animal and most local banks aren’t very knowledgable or experienced in SBA lending. In fact, half of SBA lenders only fund less than a handful of SBA loans annually.
With business lending in general but especially for SBA loans with its rules and complexities to navigate, the most ideal SBA lender is the one that not only is an expert in SBA lending but also knows your industry and business model nuances, and about your brand if a franchise. A bank being down the street from you doesn’t really provide real value to a business borrower.
When an SBA lender does a lot of loan volume for a specific industry, they know the ins and outs, nuances, and have the workarounds down pat. The approvers are more comfortable with the familiar. When a bank only approves one, or just a few per year, it’s difficult to develop real expertise in SBA lending, more-or-less an expert on SBA loans to your specific business industry type.
Out of State Lenders for All SBA 7(a) Loans
FY 2024
72% of dollars funded by out of state lenders.
74% of dollars for loans over $1 million amount funded by out of state lenders
70% of dollars for loans up to $150,000 funded by out of state lenders
70% of dollars for loans under $1 million are funded by out of state lenders
72% of startup dollars are funded by out of state lenders.
77% of startups over $1 million are funded by out of state lenders.
70% of startups under $1 million are funded by out of state lenders.
74% of dollars for change of ownership loans are funded by out of state lenders.
63% of change of ownership loans under $1 million are funded by out of state lenders.
78% of change of ownership over $1 million are funded by out of state lenders.
Out of State Lenders for Franchise SBA 7(a) Loans
FY 2024
81% of franchise loan dollars funded by out of state lenders.
81% of franchise dollars for loans over $1 million amount funded by out of state lenders
87% of franchise dollars for loans up to $150,000 funded by out of state lenders
84% of dollars for change of ownership franchise loans funded by out of state lenders
85% of startup franchise dollars are funded by out of state lenders.
90% of startup franchise loans under $150K are out of state bank funded while
77% of franchise startups over $1M are funded by out of state lenders.
84% of change of ownership franchise dollars are funded by out of state lenders.
87% of franchise change of ownership over $1M are funded by out of state lenders.
In FY 2024 Only 3 states (Maine, Ohio, and Nebraska) had more of its SBA loan dollars funded by in-state lenders than out of state lenders. There were 7 states which were over 90% of SBA funded dollars coming from out of state banks: Colorado, Arizona, South Carolina, Oregon, Wyoming, Maryland, and Nevada.
And while most lenders top ranked lenders have fund a majority of their SBA loans for out of state projects the top 1% of lenders are almost exclusively out of state lenders. The top 1% of SBA lenders in FY 2024 funded 94% of their dollars out of state and the top 1% of franchise SBA lenders funded 97% out of state.
While out of state lending has always represented the majority of SBA funded dollars market share, it has been increasing. Out of state lenders represent about 10% more SBA lending market share than they did a decade ago. Over the last 10 years out of state lenders represented 62% of funded dollars, 64% over the last 5 years, 72% over the last 2 years, and 72% over the last 12 months ending September.
Out of State Lenders:
Startup Business Loans
FY 2024
85% of startup franchise dollars are funded by out of state lenders.
57% of non-franchise startup loan dollars are funded by out of state lenders
66% of all startup loan dollars are funded by out of state lenders
85% of startup franchise loan dollars are funded by out of state lenders.
90% of startup franchise loans under $150K are out of state bank funded
77% of franchise startups over $1M are funded by out of state lenders.
Out of State Lenders:
Businesses Over 2 Years Old
FY 2024
75% of established business loans up to $150,000 are funded by out of state lenders.
74% of established business loans up to $500,000 are funded by out of state lenders.
67% of established business loans over $500,000 are funded by out of state lenders.
69% of established business loans over $1 million are funded by out of state lenders.
75% of established business franchise loans up to $150,000 are funded by out of state lenders.
70% of established business franchise loans up to $500,000 are funded by out of state lenders.
72% of established business franchise loans over $500,000 are funded by out of state lenders.
70% of established business franchise loans over $1 million are funded by out of state lenders.
Out of State Lenders:
Change of Ownership Loans
FY 2024
84% of change of ownership franchise dollars are funded by out of state lenders.
72% of non-franchise change of ownership dollars are funded by out of state lenders
74% of all change of ownership funded dollars are funded by out of state lenders
77% of change of ownership franchise loans under $150K by out of state lenders
87% of franchise change of ownership over $1M are funded by out of state lenders.
Out of State Lenders:
Businesses Under 2 Years Old
FY 2024
77% of new business loans up to $150,000 are funded by out of state lenders.
73% of new business loans up to $500,000 are funded by out of state lenders.
79% of new business loans over $500,000 are funded by out of state lenders.
79% of new business loans over $1 million are funded by out of state lenders.
81% of new business franchise loans up to $150,000 are funded by out of state lenders.
74% of new business franchise loans up to $500,000 are funded by out of state lenders.
86% of new business franchise loans over $500,000 are funded by out of state lenders.
85% of new business franchise loans over $1 million are funded by out of state lenders.
Having a local lender who is also an expert in SBA lending and your industry, who is motivated to lend, whose qualifying criteria you meet, and who provides competitive rates and a great process experience could be a more ideal scenario for some business owners but this is not always available or even typical. Even if your SBA loan was done with a local bank you would never have to literally step inside the bank. Everything nowadays is digital and the physical location of the bank has no bearing on the bank being the right match for your business loan. If you prefer local business bank lending you have plenty of options but I encourage you to think about industry more than geography and use the best lender for your situation and circumstances regardless of the state they are in.
Think Inside the LoanBox
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Source: All SBA 7(a) data shared is based on all SBA lending from all sources and not from SBA lending through LoanBox. SBA data and reports are not from the SBA but from SBA data from the lending analytics platform developed and maintained by SBADNA Analytics. SBADNA and LoanBox are both owned by the same parent company FuseSync LLC. LoanBox and SBADNA does not validate or verify the data released by the SBA and provides no warranty of data accuracy or completeness.