Financial institutions are gearing up for an influx of loan applications due to the Paycheck Protection Program (PPP), which could begin seeing applications as soon as Friday, April 3. In addition to existing SBA 7(a) lenders, all federally insured depository institutions and federally insured credit unions are automatically eligible right now to participate in PPPs. Just 1,700 financial institutions are certified SBA 7(a) lenders, however, leaving many financial institutions confused about the process and SBA buzzwords involved. A key part of applying for a loan is actually submitting a loan. It is important to remember that the SBA doesn’t fund the loans. Rather, it guarantees up to 85% of loans through partnering lenders and institutions (Note: the agency is guaranteeing 100% of the loan under the Paycheck Protection Program). When a partner lender is ready to submit loan guaranty packages and loan servicing request packages, it does so through the SBA’s online portal, E-Tran.
Breaking Down SBA Lending: What is E-Tran?
While flexible terms and low interest rates have made traditional SBA 7(a) loans attractive to small business borrowers, they do have their drawbacks, including lengthy loan turnaround times and time-intensive processes. The implementation of electronic loan processing, or E-Tran, has significantly improved efficiency and decreased costs in the loan guaranty origination and servicing processes. Prior to E-Tran, lenders had to physically mail all of the forms to the SBA. Once the forms were processed, the SBA’s response would also be sent back to the lender via mail.
To use E-Tran, financial institutions must have an account set up through Capital Access Financial Systems (CAFS). If an institution does not currently have access, it must set up a new account through CAFS. If your institution needs assistance, it can contact [email protected].
To access E-Tran, lenders have two options. The first is to complete loan data file transfers in XML format, either through a system such as the Sageworks SBA Lending Software, or from a bank’s proprietary system to the SBA’s E-Tran database. Lenders can also access E-Tran through its web page, and then enter loan information on individual loans directly on the site.
Benefits of leveraging a vendor for E-Tran
While E-Tran has improved the speed and efficiency of submitting applications, it’s not a perfect system. E-Tran can be challenging and require a high learning curve, especially for those that are new to SBA lending. Furthermore, if there was a mistake in the application, E-Tran will send back an error message, but won’t point to where the mistake is in the application, causing headaches and wasted time.
Leveraging a vendor, like the Sageworks SBA Lending Software, greatly improves the efficiency of submitting loans through E-Tran. This software collects the exact data points needed, automatically generates the required documents and returns recommendations based on qualification, and smoothly integrates with E-Tran to submit the application quickly. With the flood of small business borrowers expected to apply for the PPP loan, scale and efficiency will be key in order to get money into the hands of small business owners as soon as possible.
For more information on the CARES Act and the Paycheck Protection Program, visit the Abrigo SBA Lending Resources Page, or attend the webinar, SBA Lending – What’s Going On and How Abrigo Can Help.