Many mid-sized banks aren’t getting their fair share of the $25 billion Small Business Administration 7(a) loan program kitty.
It’s impossible to pinpoint why banks with less than $1 billion in assets—which by all metrics and measures should be a mecca for SBA and other guaranteed lending programs—are often woefully underserved in terms of both number and amount of total loans.
But whatever the reasons, the result is the same. SBA lending represents a profitable, untapped opportunity for growth-oriented small to mid-sized banks.
Larger banks happily absorb the deficiency gap. In January, in testimony before the House Committee on Small Business, community banker Patricia Husic described her Harrisburg, PA institution’s commercial lending department as dominated by a successful SBA program.
“Loans to small businesses comprise 85 percent of our commercial lending at Centric Bank,” she said. “Financing small business is the core of what we do and it is our specialty.”
Like Centric Bank ($555 million in assets), many community banks are surrounded by enterprising entrepreneurs with the dream and drive to succeed. But if they can’t get a “yes” from a local bank for financing, neither those small businesses nor the jobs they’re ready to create ever materialize.
Husic said the SBA 7(a) program was vital to her bank’s ability to finance entrepreneurs in a safe and sound manner. Her stories about a restaurateur wanting to expand, an Army veteran wanting to start a family business, and a minority-owned construction company wanting to enter new market areas are all applicable and recognizable in Arkansas.
None of the three examples she gave were able to obtain traditional financing. All of the three—thanks to Centric Bank’s SBA lending program—have produced new jobs, revenues and economic activity through their growth.
Husic spoke for many financial institutions when she described the need for resources with expertise in SBA processing and underwriting. Once Centric Bank got a team on board with strong SBA credentials, they doubled its lending.
Many banks often overlook commercial lending opportunities because they are unfamiliar with SBA protocols and requirements or because they don’t have resources in place or in house with the necessary expertise.
Remedying that situation, either by investing in internal staff or outsourcing to a lender service provider such as Bank Solutions, will spur the entrepreneurial spirit and accelerate new employment. It can also create a strong stream of non-interest income for banks just like yours.
Contact us today to learn more!