Small Business Lending Competitive
REsource Capital opened an office in Holland early this year to cover an area in western Michigan that runs from the Indiana state line to the Upper Peninsula.
The company, which also has an office in suburban Detroit, promises to have an answer for a borrower within just two or three days, once all information is gathered, required private capital is secured from private parties and a full SBA loan application is submitted.
An SBA-designated certified development company, REsource Capital leverages its central administrative office in Sacramento, Calif., to process loans quickly and send them to the SBA for final approval. So said Lisa Luckey, the director of business development for REsource Capital in West Michigan.
By reviewing loan applications administratively in California, rather than through a local staff and a lending committee, REsource Capital seeks to trim time from the process for small businesses that require a quick response.
“When they have a small business and they have contractual commitments, they need to know within that week. They need an answer,” Luckey said.
Luckey left Lakeshore 504 in Holland, an SBA-certified development company, to join REsource Capital.
Founded in 1978 and also operating in Georgia and California, REsource Capital has processed more than 1,300 loans totaling more than $1 billion.
In opening the Holland office, REsource Capital creates new competition among SBA lenders, including Lakeshore 504 and the Economic Development Foundation in Grand Rapids.
The SBA last fall removed ended exclusive service territories for certified development companies, enabling them to cross into each other’s markets. The change gave REsource Capital an opportunity to move into western Michigan with a new office.
“They were working our numbers and really liked what they saw and really wanted to be here on this side of the state,” Luckey said.
The elimination of service boundaries is forcing certified development companies that process SBA loans to improve and compete more on service, said Richard Tempken, director of the SBA’s Michigan office.
“It’s kind of gotten everyone’s attention and sharpened everyone’s focus,” Tempken said.
Lakeshore 504, for instance, is setting up localized loan committees that will review and judge loan applications from small and start-up businesses. The idea is to speed up loan reviews and make Lakeshore 504 more responsive to borrowers by having applications judged by people who have a greater familiarity with the local market and business environment.
Lakeshore 504 is also applying to the SBA for preferred lender status that could quicken response times, reported Ed Garner, business development manager.
In Grand Rapids, the Economic Development Foundation has expanded its coverage statewide.
According to Jennifer Okhuysen, executive director, it is setting up new localized loan committees in Kalamazoo and Grand Traverse County, and added staff.
Both Okhuysen and Garner — also the vice president of economic development at The Chamber of Commerce in Grand Haven who provides administrative support for Lakeshore 504 — say their organizations can provide a relatively quick response to borrowers once a full application is received.
They say servicing a loan once it’s approved is also as important to small business owners as the speed in which it’s processed.
“Servicing your customer is really what it comes down to and making sure their needs are met, rather than a set timeline,” Okhuysen said.
SBA loans are typically for capital expenditures and rare is the instance where a small business owner needs an answer on a loan application within a day or two, Garner said.
If that situation arises, he said, he can bring the local loan committee together quickly or committee members can review and act on an application electronically.
“We think we can respond just as quickly as anybody,” Garner said.
The SBA, working through certified development companies, can provide small and start-up businesses up to $1 million in long-term, low-interest financing, and up to $1.3 million in certain circumstances such as revitalization of a business district, rural development or if the borrower is a minority enterprise.
SBA funds cover 40 percent of a project’s costs. A borrower must first secure 50 percent of what he or she needs from a private lender and 10 percent of his or her own capital.
Loans are for projects of at least $125,000 and can cover the costs to acquire or upgrade a building and purchase machinery or equipment with a minimum 10-year useful life.
Through May 31, the Economic Development Foundation was the No. 1 certified development company in Michigan, handling 24 loans totaling $13.4 million for the SBA’s 2004 fiscal year that runs through September.
REsource Capital was No. 2 with 20 loans totaling $9.5 million and Lakeshore 504 was fourth in the state with 10 loans totaling $3.4 million.