Independent Banker - February 2022 - 27

Next: Fintech collaboration opportunities 
a microlending program, the
underwriting standards are similar
regardless of whether it is a $5,000 or
$50,000 loan. In addition, compliance
risk associated with small business
loans could become even more difficult
if the new Section 1071 rule proposed
by the Consumer Financial Protection
Bureau regarding small business
lending data collection is finalized.
" Compliance is definitely a factor
that, unfortunately, seems to be going
in the wrong direction and growing
in the years to come, " says Michael
Emancipator, ICBA's vice president,
regulatory counsel. ICBA has raised
a concern that if the government
is looking to increase access to
credit, especially for startups and
entrepreneurs, it should figure out
ways to remove compliance burdens
and barriers to small business
products so that those entities can get
access to capital.
Although the surge in PPP lending
highlighted a need for loans among
underserved borrowers, it also has
led to some creative solutions. For
example, OceanFirst Bank was one
of five financial institutions that
partnered to create the Microloan
Recovery Program in Philadelphia.
The program provided low-interest
loans ranging between $3,000 and
$25,000 for small businesses that
were affected by COVID-19.
The program was created by
Univest Bank and Trust Co. in
Souderton, Pa., which partnered
with OceanFirst Bank; Bryn Mawr
Trust in Bryn Mawr, Pa.; Customers
Bank in Phoenixville, Pa.; and WSFS
Bank in Wilmington, Del. Together,
the consortium provided $525,000
in loans to 21 businesses between
November 2020 and July 2021.
Microlending is something that
OceanFirst has had its eye on for
some time, but it didn't have the
systems in place to provide small " The
goal is to get these businesses to
become viable and eventually develop
relationships with banks that can be lifelong. "
-JENNY BENNETT, SUMMIT BANK
balance business loans efficiently.
" When we find organizations in
our communities that are able to do
those things well, we don't feel a need
to duplicate them, " Maher says. " We
would rather invest alongside them in
a way that ensures that the dollars get
out in the community. "
The bank is also planning to continue
technology upgrades in 2022 that will
make it easier and more streamlined
for small business borrowers to do
business with the bank.
Small dollars, big impact
While banks often collaborate
when financing a large loan to
avoid concentration risk, " the same
theory could apply for smaller credit
products, " Emancipator says. Banks
could pool their resources or leverage
the expertise or resources of a bank
in a particular location to put capital
to work. He notes that community
banks could take this path to provide
small business microloans more
cost efficiently.
During their partnership, Summit
Bank and Community LendingWorks
provided 19 microloans with an
average loan amount of $7,500.
Terms were up to five years at an
interest rate of 2.0% to 2.5%. It's not
enough money to pivot a business's
operating model, but it can provide
critical capital, says Lynn Meyer,
director of lending at Community
LendingWorks. For example, some
borrowers used the money to stock
up on product to deal proactively
with supply chain issues. " PPP loans
helped a lot of folks, but not everyone
qualified for those loans, " he says.
" So, absolutely there was and is still
demand out there. "
Another mission of the Summit
Bank program was to provide loans to
those businesses that were on a path to
viability. Loan underwriting looked at
historical financials to make sure those
businesses had the ability to survive.
" The goal for any lender is to help
the community grow and provide
stabilization of capital, but also to
be a good steward of the capital that
you are asked to deploy, " Meyer
says, noting that the bank considers
whether the funds would make a
significant difference to the company's
survival and its ability to keep
people employed.
Summit Bank is also looking at
ways it can continue to partner with
Community LendingWorks, such as
creating a revolving loan program
as existing loans are repaid. " We
would like for this program to live in
perpetuity, " Bennett says, " and we
believe that it's our responsibility as a
community bank to help that group of
small businesses. " 
Beth Mattson-Teig is a writer
in Minnesota.
independentbanker.org Q 27
http://www.independentbanker.org
Independent Banker - February 2022

Table of Contents for the Digital Edition of Independent Banker - February 2022
