By Lori Hilman, President & COO, Plains State Bank

Small businesses are a pillar of the U.S. economy, generating trillions of dollars in economic output and employing roughly 62.3 million workers. But they are also among the first to feel the pain of an economic downturn. Unlike large corporations, small businesses rarely have the luxury of large cash reserves. The median small business has just about 27 days of cash on hand.

When cash gets tight, owners typically turn to bank loans, lines of credit, and credit cards to keep the business running, smooth out volatile cash flow, or fund growth. That makes funding speed critical. A business with only a few weeks of cash can’t afford to wait months for financing. 

This is why the Preferred SBA Lenders program exists: to give qualified lenders greater authority to approve SBA-backed loans and small businesses faster access to capital.

Why Preferred Lenders Cut Loan Approval Time in Half

The Preferred Lenders Program (PLP) is an official program managed by the U.S. Small Business Administration (SBA). Its purpose is to streamline administrative processing, shorten loan turnaround times, and relieve federal administrative burden.

Since the SBA does not act as a direct lender, the cash has to come from standard private institutions, also known as SBA lenders. Under PLP, some lenders perform better than others and are granted delegated authority.

This means PLP banks can make final credit decisions, issue approvals, and handle loan servicing internally without waiting on the SBA.

The Authority That Speeds Approvals

SBA lenders without PLP status must gather applicants’ financial documents, complete underwriting, and then submit the full loan package to an SBA government processing center. A federal loan officer reviews the package and decides whether to issue the government guarantee.   

But if a lender receives PLP status, it means the SBA trusts it enough to step back. Unlike standard loan processing, where the data must go through the SBA, a PLP lender can make the decision internally.

This means that an SBA preferred lender, like Plains State Bank, can cut weeks from a small business owner’s loan application. If the standard approval process can take 60-90 days, it often drops to 30-45 days with a PLP lender. For a small business financing its growth, this can be enough time to snag commercial real estate or acquire competitors before larger companies can act.

Why PLP Status Is Rare and Hard to Keep

The Preferred Lenders Program is backed by a broad, nationwide network. Across the U.S., there are thousands of financial institutions authorized to issue SBA-guaranteed 7(a) loans, which gives small businesses access to a wide lender network.

The network spans almost every tier of the financial sector, from national megabanks like Huntington National Bank or TD Bank, local community banks, non-bank institutions, and digital-first banks.

Still, not every financial institution can gain PLP status. This privilege is reserved only for institutions vetted by the SBA that have demonstrated a high volume of successfully originated SBA loans, deep knowledge of SBA regulations, and low historical default rates.

Also, PLP status is not permanent. The SBA reviews preferred SBA lenders every two years. If a lender’s default rates spike, or if SBA audits reveal they are taking shortcut risks, the SBA strips them of their delegated authority. 

How PLP Helps Small Businesses Move Faster

The main advantage of working with an SBA lender with PLP status is the shorter approval period. However, small business owners need to understand that this doesn’t bypass federal underwriting criteria. A borrower still has to provide standard tax returns, debt schedules, and financial statements. 

The timeline savings occur entirely in the administrative phase, not the borrower-preparation phase. Here’s a quick overview of the difference in funding speed between non-PLP lenders and PLP ones: