The keys to success in SBA lending

By William Atkinson

Community banks of all sizes can succeed in SBA lending. The key is to understand the program’s unique characteristics—and to be willing to become an expert.

What does it take to succeed as an SBA lender? Perhaps the most important factor is a willingness to become an expert in the Small Business Administration lending program. This requires getting familiar with everything related to the program. For example: “The most critical aspect for a bank wishing to become a successful SBA lender is the ability to differentiate between a potential SBA loan transaction and a conventional C&I loan,” says G. Arne Monson, president of Holtmeyer & Monson, an SBA lending consulting firm for community banks. “Successful SBA lenders are able to identify the inherent characteristics that can be mitigated via the SBA guaranty. Many commercial lenders are not able to ‘think outside the box’ in identifying SBA transactions.”

Building a knowledge base
One bank that has made a steadfast commitment to expertise is $3 billion-asset German American Bank headquartered in Jasper, Ind. “There are a few other banks making SBA loans, but we are the ‘go-to’ SBA lender in the Evansville, Ind., market, because we position ourselves as the experts,” says Lindsay Botsch, regional vice president, commercial banking. “We do this by keeping up with all of the changing regulations and policy updates, attending SBA conferences and maintaining close contact with people at the SBA district office to answer questions and clarify new procedures for us.” Every year, for example, the SBA changes many of its policies and procedures, and, according to Botsch, if banks don’t keep up with all of this, it is very difficult for them to make SBA loans.

“We made a commitment to strengthen SBA lending over thelong term andhave since made tremendous progress.”
—Maggie Ference, Huntington National Bank

“When small businesses do well, our communities do well,” says Maggie Ference, SBA program director for $104 billion-asset Huntington National Bank in Columbus, Ohio. “We put a stake in the ground in 2010 with a $4 billion commitment to small-business lending that culminated in 2013, and we knew at the time that SBA lending would play a central role. We made a commitment to strengthen SBA lending over the long term and have since made tremendous progress.”

Ference attributes the bank’s success to its commitment to expertise. “We offer significant SBA lending expertise in the form of SBA product specialists, and have always cultivated a strong relationship with the SBA both regionally and at the national level,” she says. At the time Huntington initially committed to strengthening SBA lending, it made hiring more than 150 business bankers a top priority, which significantly enhanced its inroads into the local business community and its ability to help business owners obtain credit. “At the same time, we managed to build our lending capacity through three distinct SBA product lines for the branches, relationship managers and SBA product specialists,” she says. “This has created a distinct competitive advantage.” Back-office speed and expertise is also important.

“With this kind of efficiency,” Ference adds, “more time is spent out in the market meeting business owners, understanding their challenges and doing the kind of due diligence required to maintain our risk profile while helping their businesses perform.”

William Atkinson is a writer in Illinois.