At the start of June, Zions Bank of Salt Lake City sent out an email. The message was clear: The bank will be exiting the SBA wholesale market this summer.
While the bank’s rationale for winding down its participation wasn’t stated, there could be implications for your next small business loan, regardless of where you get it from.
Zions Bank’s Withdrawal Timeline
For small business owners applying for SBA loans from Zions, the bank gave a few indications of how things will proceed this summer:
New loan requests will be accepted through June 16
No construction financing applications will be accepted
Letters of intent must be issued, signed, and returned to the lender by June 23
Loans must be approved by the end of July
The bank added it would be fully staffed through August 4, 2023, to ensure it honors existing commitments.
What Does This Mean for Me?
First, let’s examine how important an SBA lender Zions Bank actually was.
The bank offered SBA 7(a) and 504 loans, but they weren’t one of the largest in either financing program.
A quick look at the past eight months of data from the SBA shows Zions Bank has been active, though they’re nowhere at the top of the pack. For example, they ranked 35th in terms of SBA 7(a) loan approvals (of approximately $95 million) and 67th for SBA 504 loans (just one loan approval of about $1 million).
Zions Bank was perhaps better known as a purchaser of SBA 504 first-position loans, which means they gave other lenders significantly more liquidity. Their absence could certainly be felt here, and it may impact loan terms you get in the near future.
Potential Outcomes
This could mean more than just higher interest rates. While that’s a very real possibility, the biggest change could be in how many banks are willing to extend financing at all, particularly under the competitive 504 program.
Banks unwilling to keep many 504 loans on their books may choose to originate fewer of them, or take steps to ensure these loans are sufficiently profitable for them. Of course, another bank could eventually fill Zions Bank’s shoes as a purchaser of SBA debt, but that could take a while to materialize.
Shopping Your Loan Is Key
SBA loans remain an excellent source of financing, whether your business is expanding, buying equipment or real estate, or acquiring a competitor.
How Zions Bank’s exit ends up impacting the SBA financing world is anyone’s guess. What’s important to remember is that if your business needs financing, you shouldn’t limit yourself to just one lender, now more than ever.
As terms begin to vary, it’s important to get competing quotes from several lenders. You don’t want to have your business saddled with unfavorable terms, especially as the economic headwinds pick up.
Our small business financing marketplace solves for this. Take a minute to put your details into the form on our get financing page, and we’ll shop it around until we find the best terms for you and your business.