Independent Banker - May 2019 - 24

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outside of the bank who might be in a position to provide
loan referrals. " We have 23 SBA business-development
officers who work directly with commercial real estate
brokers and sales agents, with other banks that can't assist
their clients with SBA loans, and with other sources, such
as loan brokers, attorneys and CPAs, " Bartram says. " We
educate them so that they refer clients to us. "
Fostering customer growth
FNBC Bank, a $468 million-asset community bank in Ash
Flat, Ark., takes a personalized approach to SBA education.
" We spend a lot of time with customers on the front end to
help them determine whether SBA loans are right for them, "
says Mark Skelton, vice president and senior commercial
lender for the bank's FNBC Small Business division. " The
goal is really to create a thought process with them. My job is
not just to make loans, but to help customers. We don't want
them to ignore potential risks. The last thing we want to do
is drown someone in a business that they shouldn't be in. "
When Skelton sits down with an SBA candidate, he starts
out by discussing the advantages and why they should
consider SBA loans in certain circumstances. He sees
opportunities for SBA loans in four areas.
First, they're especially useful for startup customers. " A
lot of commercial banks are leery of these, because they are
unproven, " he says. " However, SBA loans allow us to mitigate
a lot of the risk. "
Second, there are risks when someone wants to take over
Demystifying SBA lending
While many community banks
emphasize their SBA loan acumen,
others focus on other types of
commercial loans, using SBA
loans as backup. In so doing,
they make it clear to customers
and prospects that SBA loans
aren't the only option. One
such bank is $160 million-asset
Farmers & Merchants Bank in
Miamisburg, Ohio.
Daniel Yoder, the bank's vice
president of commercial lending,
makes it a point to address
customer concerns about SBA
loans so that they can select the
loan option that's best for them.
One concern he hears from
customers is that SBA fees are
often higher than conventional
loans. As such, he often tries
to help customers qualify for
conventional loans first.
Another customer concern is
that SBA rates are also higher
than conventional loans. In this
instance, Yoder might suggest
that, if the customer can't qualify
for a traditional loan, they start
out with an SBA loan and then
refinance to a conventional loan
down the road.
One misconception he hears
is that the money for SBA loans
comes from the government, and
thus the bank has nothing to
lose and can therefore " go easy "
on borrowers during the loan
approval process.
In response, he explains that
the loan actually does come from
the bank, that the bank would
recover only a portion of its loss if
the borrower defaulted, and that
it is strict on SBA deals because of
this risk.
In fact, according to Yoder,
" We use the SBA program when
a loan presents greater risk than
conventional underwriting will
accommodate. "
an existing business, and the SBA guarantee reduces a lot
of the risk. Third, many potential customers have limited
collateral, and the SBA guarantee mitigates much of the collateral
risk.
Lastly, SBA loans have longer amortizations. For example,
if a bank is financing intangibles, such as furniture,
fixtures and equipment, or FF&E, most banks like to keep
the loan to five or seven years. " An SBA guarantee will allow
us to go out to 10 years, which means a lower payment and
less of a debt burden to customers, " Skelton says.
Skelton educates customers and prospects about business
resources that can help them succeed in qualifying for
SBA loans in the first place. Recently, he recalls a customer
who wanted to open a title company. Skelton referred the
customer to a small business and technology business center,
which is designed to help small-business owners with
feasibility studies and more, free of charge. There, the customer
got help with her business plan. " When she provided
this package to me, there was a lot of good information for
me to look at as far as projections, " Skelton says.
He finds the process of providing personalized SBA loan
education personally rewarding. " It is very satisfying for
me to help customers realize their dreams of starting their
own businesses, " he says, " and to know that the education,
information and advice that I provided helped them to do
it in a safe way. "
William Atkinson is a writer in Illinois.
24 Q ICBA Independent Banker Q May 2019
Independent Banker - May 2019

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