What the Big Banks Won’t Tell You About Business Loans


By Leigh Buchanan


An SBA-backed loan could be a great option for your business. But you can’t count on big banks to help you, new research shows.

Last year 2018, SBA administrator Linda McMahon told Inc. magazine that her agency is “the best kept secret in the country.” If entrepreneurs keep going to the wrong banks, it may stay a secret.

Large banks like Wells Fargo are often lauded as active Small Business Administration lenders. And, in fact, they do process a significant volume of SBA-backed loans, which offer entrepreneurs lower interest rates and down payments, and longer repayment terms than ordinary bank loans. But the large banks’ numbers are less impressive when compared with much smaller banks, some of which specialize in such loans.

After the recession, many large banks stepped away from small-business loans, although they have been returning to that business over the past few years. But small-business loans are less profitable and riskier than larger loans made to bigger businesses.

“Large banks don’t have to lend to small businesses to survive,” says Ami Kassar, CEO of MultiFunding, an Ambler, Pennsylvania, business that helps small and midsize companies find debt financing. (Kassar is also an Inc.com columnist.) That means some big banks are less likely to introduce and explain SBA-backed loans to clients, says Kassar. Since most small-business owners get lending information from their bankers, and many patronize local branches of large banks, they may never even learn such loans are an option.

To illustrate the disparity, MultiFunding recently conducted a study of SBA lending activity that uses the number of a bank’s branches as a proxy for its size and reach. Among the 10 largest banks based on assets, TD Bank generated the most 7(a) loans (the SBA’s most popular program) in 2017, with an average of three per branch. Wells Fargo ranked second, with an average of one SBA loan per branch in 2017.

“It’s important to note that SBA lending is only a portion of our total small-business lending, and retail branches are just one of Wells Fargo’s delivery channels to serve the lending needs of small business owners,” says Jim Seitz, Wells Fargo’s communications manager for small business and business banking. “Wells Fargo is committed to SBA lending in every market we serve, with a dedicated SBA lending team to meet the needs of small businesses across the United States.”

Bank of America ranked last among large banks on MultiFunding’s ranking, producing on average one SBA-backed loan for every 30 branches. Don Vecchiarello, a spokesman for Bank of America, also emphasized that the company is very active in the small-business market generally. He says the company’s SBA loan business represents just 5 percent of its substantial small-business offerings–and that it is a growing part.

“Since 2015 we have tripled the number of people we have working in our SBA group,” says Vecchiarello. “As far as the 7(a) product, in 2016 we have nearly doubled the amount of loan production.” The company is also a perennial top five lender in the SBA’s 504 program to finance the purchase of fixed assets.

Still, compare those results with three single-location institutions: Celtic Bank, in Salt Lake City, which approved 1,417 loans in 2017; Independence Bank, of East Greenwich, Rhode Island, which approved 1,141; and Live Oak Bank, in Wilmington, North Carolina, which approved 1,055. Several non-bank lenders, such as Newtek and Readycap Lending, also outperformed big banks.

Live Oak Bank, founded in 2008 to provide SBA loans to veterinary practices, is online-only, which MultiFunding counts as a single branch. Today, the company serves 19 vertical niches, and about 63 percent of its loans are SBA-backed.

“There are some industries where business owners have historically received SBA loans, and so in those industries they have a little bit more knowledge,” says Mike McGinley, group general manager for Live Oak Bank. “In our average industry, though, we have to do a lot of education.” Health care, accounting, and agriculture businesses are among those often in need of introduction to the SBA program. The company also created an online tool to significantly streamline the process.

For its part, the SBA has been trying to make its loan programs more visible. McMahon recently finished a tour of communities around the U.S., during which she promoted the SBA’s products and services, including the loan programs. And the agency launched an online tool to match small-business owners with SBA lenders. But “the SBA can’t really control what Bank of America does or does not tell their clients,” says Kassar.

Of course some small-business owners who know about SBA-backed loans choose not to pursue them because they’re put off by the paperwork.

“It can be a real pain in the rear end,” says Kassar. “But if you can get 10 years, rather than five years, to pay back a loan, and it takes you a few extra hours of paperwork, that is probably worth it.”

In the end, the message isn’t small-banks-good/big-banks-bad, says Kassar. Rather, it is find the right bank for you. That could be a large provider. “We are big fans” of SBA loans, says Tom Pretty, head of SBA lending for TD Bank, where 7(a)s make up 41 percent of small-business loan activity. “We go out of our way to show customers all the different options.”

Small-business owners should ask about a potential lender’s experience with SBA-backed loans and how many they approve, Kassar recommends. And avoid throwing in the towel too early. “Don’t assume that just because one bank did not mention the SBA or told you that you were not qualified that that is gospel,” says Kassar. “If you were told that by five banks, then that is probably not for you.”


This article was first published at Inc


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WAUG: Heritage Bank Restates Commitment To Youths, Sports Devt

BY BUKOLA IDOWU

Heritage Bank Plc has restated commitment to improved youth and sport developments in the country, thereby attaining rapid growth in these areas through sponsorship of sporting activities in tertiary institutions.

The managing director and chief executive of Heritage Bank, Ifie Sekibo affirmed this at the just concluded 14th edition of the West African Universities Game (WAUG) held in Port Harcourt at the University of Port Harcourt.

The bank recently supported the premier edition of Africa Freestyle Football Championship and continued to sponsor youth entrepreneurial initiatives, particularly, The Next Titan,” a reality television show.

Sekibo, who was represented by a senior manager of the bank, Oladapo Lawal, stressed that the financial institution has strong desire to see young Nigerians succeed in other areas other than what they studied in school, whilst urging government at all levels and private institutions to pay closer attention to sponsorship and innovation.

He stated that Heritage Bank, as the sponsor of WAUG, is working assiduously towards achieving its vision to become a bank of national reckoning for which it was established.

He noted that there is need for institutions to give back to society through sponsorship.

“Heritage Bank believes in development. These are University Students and we want to level our legacy on University students that is one of reasons we decided to sponsor the event. We have the tenacity to develop and sport is a way of developing youths in the country. We want to encourage the youth and I believe that this type of games are capable of robbing off on the students in future.

“I would advise the federal government to look in this direction, because when we support this kind of project, we are developing our country. The government needs to do more in sponsorship drive of sports in the country,’’ he noted.

Meanwhile, UNIPORT emerged the overall winner of the 14th WAUG, 2018 amassing 125 medals to top the log.

A breakdown of the figures shows that UNIPORT won 75 gold, 26 silver and 24 bronze medals to beat University of Lagos (UNILAG), the first runners up that scored 16 gold, 24 silver and 16 bronze. The second Runners up was University of Cape Coast, Ghana that bagged 9 gold and 16 silver medals.

The football event went to University for Development Studies, Ghana that beat Bayero University, Kano(BUK) 4-2 on penalties after the duo played out a 1-1 draw within 90 minutes regulation time and 30 minutes extra time.

Declaring the competition closed, the Minister of Education, Adamu Adamu congratulated the winners and indeed all the participants for a job well done.

He commended UNIPORT for organizing what he described as one of the best championships in the history of WAUG.

The Minister said university games and sports generally should be encouraged in our institutions to build friendships and bridge barriers among the students in Nigeria and beyond.

He promised that the Federal Government will continue to encourage sports in our schools.

In his speech, the Vice Chancellor(VC) of UNIPORT, Prof Ndowa Lale commended Heritage Bank for its sponsorship to the successful competition. He congratulated he winners and the losers alike. The VC particularly commended University of Cape Coast for coming all the way from Ghana to lift the football trophy regarded as the king of sports.

Prof Lale who said the hosting of the games was not perfect, expressed confidence that subsequent editions will be better.

Source – Leadership