Flourishing Forte


Georgia bank propels major growth through niche SBA lending

By Howard Schneider

When Richard Bradshaw became president of specialized lending three years ago at United Community Bank in Blairsville, Ga., the bank’s three-person Small Business Administration department was lending about $10 million a year.

By earlier this year, United Community’s SBA staff had totaled 50 people, and the department is still growing. More significantly, last year the $9.6 billion community bank issued $140 million in SBA loan commitments.

In those three years, SBA lending became a huge niche for the bank, a business niche that was in turn built on niche business lending.

How did Community Bank pull off the transformation?

Bradshaw relishes building on the existing relationships United Community lending officers have with southeastern Georgia businesses. Last year retail branches delivered 40 percent of the bank’s total SBA lending, although Bradshaw expects that to dip to 30 percent this year as its national lending channel grows.

United Community is expanding SBA lending by going outside its retail footprint. Because the bank is taking on more risk by working with more borrowers it doesn’t know well, Bradshaw mitigates that in two ways. First, the bank conducts, “vertical” lending—originating SBA loans only within specific industries it has decided to cultivate after studying them carefully. Bradshaw is experienced with this approach: He began his SBA lending career in 1995 by focusing on manufacturers and franchisees.

Second, United Community dedicates both SBA loan officers and back-office staff to specific industries: veterinary, franchises, medical and dental offices, funeral homes, manufacturing and owner-occupied commercial real estate. All of these, Bradshaw notes, were selected because they have a history of low default rates.

Bradshaw explains that an underwriter will know the average revenue a dentist receives from each workstation in an office. So if a practice is borrowing to expand from four to eight chairs, the underwriter is able to assess whether the dentist’s financial forecast is reasonable.

Having specific industry knowledge—along with the SBA lending guarantee—mitigates the risks of growth, Bradshaw contends. Finding lenders with the necessary backgrounds is tough, he admits. But United Community’s “proven track record” in SBA lending is making it easier to recruit the right talent.

Marketing tools

Niche lending also provides focused marketing opportunities. United Community lending specialists attend trade shows “to get the brand out,” says Bradshaw. The bank places advertisements in professional journals and provides articles for them as well.

United Community also has made videos highlighting customers who appreciate its unique approach. These promotional tools are played at trade shows and are featured on the bank’s website.

Becoming a lending specialist leads to referrals. Often an architectural firm or construction company devoted to one of United Community’s favored industries will encourage clients to contact the bank.

Bradshaw asks bank examiners for an introductory meeting before they go to work. Explaining from a risk standpoint why the bank does industry-specific SBA lending helps examiners understand how risks are being mitigated, he says.

Strong partners

Veterinarians and dentists are highly trained professionals. But their schooling doesn’t include the basics of running a business. Finding a bank that understands their practice and can help make their business plan work is a huge benefit. Just being aware of industry trends and business challenges goes a long way toward building trust—and a long banking relationship with these small businesses.

“Last year United Community Bank issued $140 million in Small Business Administration loan commitments.”
—Rich Bradshaw, United Community bank

United Community is among the top 25 SBA lenders nationally and an SBA Preferred Lender. Yet the principles behind the bank’s loan growth can help any community bank, Bradshaw says.

Working with SBA has gotten easier in recent years, and much of the application process now can be accomplished online. However, SBA lending in itself is a specialized activity, and it’s beneficial for community banks to have dedicated SBA loan officers and underwriters.

One feature of SBA loans is that they’re versatile and give banks the opportunity to help with a variety of business situations. They can fund a veterinary office’s construction and its equipment purchases, as well as later expansion or the purchase of another practice.

Having a government guarantee for up to 85 percent of the loan amount can give community banks the ability to make loans they wouldn’t or couldn’t without it. Combining “big bank” lending capacity with a community banker’s approach to relationships is a winning formula for SBA lending, Bradshaw says.

Many community banks already have commercial lending niches, such as agriculture or energy-sector loans, depending on their local economies. Establishing a proficient SBA lending staff—and encouraging loan officers to focus on learning and serving a specific industry—can help community banks grow without adding branches.
United Community Bank has proven that.

Howard Schneider is a freelance financial writer in California.