Midwest banks boost lending capacity with the Small Business Administration

Participants in the Small Business Administration’s flagship 7(a) lending program say the formula for success includes counting on internal experts who can clearly explain requirements while empathizing with small business owners..Take Fishers, Ind.-based First Internet Bank of Indiana, which as of mid-June was the seventh-largest SBA 7(a) and 504 lender by approval amount in the country this fiscal year with 315 loans approved for $490 million.The bank’s success in SBA lending has been years in the making. In the fall of 2019, First Internet acquired the Schaumberg, Ill.-based small business lending division of First Colorado Bank in Paonia. The covid-19 pandemic struck a few months later. As many small business lenders cut back, First Internet Bank realized its opening to connect with more borrowers.The bank serviced $88 million in SBA loans and onboarded a team of seasoned professionals led by Mark Gibson, former national sales manager for real estate finance company Ready Capital Corp. First Internet also brought on David Bybee, who understood the compliance and supervision side of SBA lending from his 17-year career at the Federal Reserve. Bybee is now senior vice president of government guaranteed lending..First Internet Bank already had experience with remote service through its consumer work, said President Nicole Lorch. As part of its effort to grow its SBA lending, First Internet implemented workflow technology and used a third-party system to take loans from the prospecting stage to closing while keeping track of the process.“With so many lenders having already been in small business lending, they kind of took a moment, took their foot off the gas, and assessed how they were going to service their existing portfolios,” Lorch said. “And because we were really coming at this from a fresh perspective, while everybody else was trying to mend their portfolios, it gave us a great opportunity to connect with borrowers at a time when the government was offering 90 percent guarantees on 7(a) loans.”Their work paid off. Today, the $6 billion First Internet Bank has a dozen customer-facing SBA lenders. A staff of 100 is responsible for loan documentation, credit underwriting and for servicing customer requests.“We would love to be the premier bank for small businesses in the country,” Lorch said. “For a lot of small business owners, they feel underserved and underrepresented with some of the large banks. So we want them to know, because we were founded by a small business owner, and because we were ourselves a small business, we understand what that’s like.”‘We wanted to provide the best possible experience’Oakdale, Minn.-based Platinum Bank is another SBA lender that has experienced growth in recent years. The $636 million bank launched an initiative to expand its SBA program five years ago, said Chief Credit Officer Jeff Bajek. To do so, Platinum Bank prioritized implementing the internal infrastructure, and hired Tim Smith, a national SBA lender with a record of finding customers and developing relationships. Last year, Platinum Bank processed 98 SBA loans and had $73 million in loan closings, up from 38 SBA loans for a total of $35 million in fiscal year 2023.“We wanted to provide the best possible experience with SBA origination, and understand what we needed to put in place in order to achieve that,” Bajek said. “SBA lending is a very prescribed process. It is incredibly paper-driven and document-driven, and organizations that can really figure out how to deliver that experience in the most positive way are the ones that are going to be successful.”Higher volume 504 lenders train their staff on how to best use the program and continue to refine their expertise, said Brian McDonald, SBA Minnesota District Director. Bajek attributed Platinum Bank’s growth in SBA originations to training new hires in the pertinent SBA lending language, allowing them to help customers navigate the sometimes-cumbersome process. They also prioritize developing and utilizing technology — loan management system products and e-signature documents — to originate SBA loans as efficiently as possible.Today, the bank has five SBA originators. Platinum Bank, which is looking to reach $100 million in SBA 7(a) lending origination by next year, also wants to continue scaling SBA originations and expanding its brand opportunities as more businesses sell to the next generation or to third parties..Bajek sees Platinum Bank as different from other national SBA lenders because of its small-bank feel. “That is a key differentiator for our organization, where we can act like a small community bank and really participate on a national level,” Bajek said. “It’s going to make us successful.”SBA lending success requires committing to financial inclusion, said Christopher Soupal, division president of commercial finance at Pathward Financial. Most lenders at the Sioux Falls, S.D.-based bank are cross-trained to make loans through SBA and USDA along with conventional lending..A top 25 SBA lender in the country, Pathward had originated 88 SBA 7(a) and 504 loans for a total approval amount of $179.5 million as of mid-June. The $7 billion bank launched its SBA lending program in 2014, quickly spotting a large group of potential customers needing financial assistance.“It’s not only about helping people through SBA where there’s a credit need, but it’s also about trying to help rural communities,” Soupal said. “Not only helping the economics of a rural community, but also helping create jobs in rural communities is very important to us.”Prospective SBA lenders sometimes only want basic information on the program, McDonald said, with the highest-volume originators with the highest-volume originators seeking participation in the Preferred Lending Program. Doing so allows them to process, close and service SBA-guaranteed loans with fewer documentation requirements.“They tend to be active in the community and they work with SBA, with our team or our SBA resource partners,” McDonald said. “Their strong business plans, they leverage those resources of SBA resource partners to make sure that their borrowers have strong planning in place, and they’re ready to go.” St. Cloud, Minn.-based Stearns Bank shows the success of this approach. So far this year, Stearns has approved 151 7(a) and 504 loans for $61.4 million.Stearns Bank has grown its SBA lending program by training employees to understand the entire lending process while being employee- and community-focused, said Director Robin Studniski. Top decision-makers at the $3.2 billion bank are immediately available when changes in programs or procedures are proposed.Stearns employs nine SBA lenders, including one with nearly 30 years of experience. SBA lenders sometimes partner with lenders in the equipment finance division or those working with nonprofits or real estate construction companies.“We’ve actively been involved in our communities,” Studniski said. “We have an active business development department. But, even more importantly, we have always stayed very in tune with the small business loan programs.”.Ames, Iowa-based First National Bank originates SBA loans for business owners who need longer-term loans or fall short of meeting collateral requirements for conventional lending, said Senior Vice President Timothy Fitzgibbon.Approximately a half-dozen lenders at First National Bank of Ames are experienced SBA originators. “If somebody has a current client and a conventional loan is not going to work, our SBA program may help them keep the business relationship,” Fitzgibbon said. “They can continue to be the borrower-facing individual, but I’ll make certain that everything’s being done on the back end to secure the SBA guarantee.”During Fitzgibbon’s eight-year tenure at First National Bank, his bank has established a more formalized SBA lending program, including building a library of lending information. Before that, lenders at one branch may not have been aware if staff at another were making similar loans, or following similar procedures they were using.Despite accounting for only a small percentage of the bank’s overall commercial lending portfolio, Fitzgibbon sees growth potential for SBA loans. “We’re hopeful it gets us into industries and areas in Iowa that we otherwise wouldn’t know had a need,” he said. “We’re not looking to have this be a significant income center for the bank, that’s not the intention..“Rather, it supports our community reinvestment efforts, and our efforts to introduce the bank to customers who we weren’t meeting through our other programs.”Fitzgibbon, who has 38 years of experience in government-backed loan programs, has built a training tool for junior lending officers over the past four years. “If you can understand and do everything correctly in an SBA loan, you’re going to have a good foundation for making traditional commercial loans because of the many rules you have to follow,” Fitzgibbon said..‘A marathon, not a sprint’SBA loan originations have grown to nearly $300 million at Merchants Bank of Carmel, Ind., from $6.5 million when Small Business Lending President Jeff Scott joined the bank six years ago.The covid-19 pandemic started less than a year after Scott joined Merchants Bank. The federal government soon rolled out emergency loan initiatives like the Paycheck Protection Program and Economic Injury Disaster Loans. Today, the bank is doing SBA lending nationwide and has offices in four states.Scott hopes Merchants Bank’s SBA program eventually grows to service $700 million to $1 billion in loans. “We want to grow,” Scott said. “We want to grow our loan book. We want to grow our activity in SBA lending and we’re climbing up the charts on a national scale. We feel that now is the right time for us to expand the business. ... Because of the changes propagated by the administration, it’s more of a level playing field and we like our chances to be able to compete.“We’re here for the long run, too,” he added. “We look at this as a marathon, not a sprint. So our focus is helping customers build a good, solid portfolio that performs well. That’s our long-term strategy.”Scott has been an SBA lender for more than 30 years, having founded a community bank in Grand Junction, Colo., in the spring of 2007. He now oversees a team of nearly three-dozen lenders at the $18.8 billion bank.Although 300 Minnesota lenders are eligible for SBA lending, only 200 are active in the space, McDonald said. Smaller banks are more likely to need to balance competing priorities and lack the resources for a dedicated SBA lending team, he added.“There’s always room for more,” McDonald said. “And I think a lot of times there’s a lot of community banks that might just do a small, handful of SBA loans, because it’s one of the situations when they have a deal in hand, it’s the path of least resistance.”.Top SBA 7(a) Lenders, loans approved Oct. 1, 2024 through July 21. 1. Live Oak Banking Co. (North Carolina), 1,779 loans approved for $2.18 billion2. Newtek Bank, NA (Florida), 4,128 loans approved for $1.76 billion3. The Huntington National Bank (Ohio), 5,799 loans approved for $1.53 billion.4. Northeast Bank (Maine), 6,772 loans approved for $1.13 billion5. Readycap Lending (New Jersey), 2,865 loans approved for $1.05 billion6. U.S. Bank (Ohio), 2,765 loans approved for $629 million7. First Internet Bank of Indiana, 383 loans approved for $568 million8. JPMorgan Chase, New York, 1,595 loans approved for $495 million9. Bank of America, New York, 782 loans for $433 million10. Celtic Bank Corp., Utah, 1,153 loans approved for $440 million11. Wells Fargo, San Francisco, 1,297 loans for $422 million12. Byline Bank, Ill., 359 loans approved for $396 million13. TD Bank, Delaware, 2,747 loans approved for $371 million14. GBank in Nevada, 140 loans approved for $352 million15. Harvest Small Business Finance, LLC, Calif., 375 loans approved for $350 million16. Lendistry SBLC, LLC in Calif., 1,667 loans approved for $341 million17. Cadence Bank in Mississippi, 649 loans approved for $330 million18. BayFirst National Bank in Florida, 1,859 loans approved for $314 million19. First Bank of the Lake in Missouri, 476 loans approved for $290 million20. United Midwest Savings Bank in Ohio, 750 loans approved for $287 million21. Port 51 Lending LLC in New York, 165 loans approved for $244 million22. Manufacturers and Traders Trust Co. in New York, 2,120 loans approved for $234 million23. Enterprise Bank & Trust in Missouri, 134 loans approved for $206 million24. Bank of Hope in California, 283 loans approved for $204 million25. Berkshire Bank in Massachusetts, 159 loans approved for $203 million26. Pathward in South Dakota, 95 loans approved for $196 million27. Zions Bank in Utah, 1,012 loans approved, $188 million28. Veritex Community Bank in Texas, 140 loans approved for $179 million29. Truliant FCU in N.C., 124 loans approved for $174 million30. Citizens Bank in Tennessee, 255 loans approved for $172 million31. Old National Bank in Indiana, 187 loans approved for $172 million32. KeyBank, NA in Ohio, 574 loans approved for $167 million33. Open Bank in California, 97 loans approved for $165 million34. T Bank in Texas, 85 loans approved for $157 million35. First National Bank of Pennsylvania in North Carolina,155 loans approved for $153 million36. Community Bank & Trust-West Georgia, 89 loans approved for $152 million37. First Financial Bank in Arkansas, 112 loans approved for $145 million38. Fifth Third Bank in Ohio, 226 loans approved for $143 million39. US Metro Bank in California, 68 loans approved for $138 million40. Hanmi Bank in California, 155 loans approved for $128 million41. Shoreham Bank in Rhode Island, 129 loans approved for $120 million42. PCB Bank in California, 108 loans approved for $120 million43. VelocitySBA LLC in California, 132 loans approved for $120 million44. Regions Bank in Alabama, 141 loans approved for $119 million45. Pinnacle Bank in South Carolina, 102 loans approved for $118 million46. The Bancorp Bank NA in South Dakota, 99 loans approved for $118 million47. Centerstone SBA Lending, Inc. in California: 83 loans approved for $117 million48. Dogwood State Bank in North Carolina, 124 loans approved for $115 million49. United Community Bank in South Carolina, 129 loans approved for $112 million50. First Citizens Bank & Trust Co. in North Carolina, 93 loans approved for $110 million