Better Your Business

Need cash?: Try these top Main Street lenders

Elaine Pofeldt, Special to

Despite heightened enthusiasm for small-business lending in the banking sector, it's not easy for mom-and-pop firms to get a U.S. Small Business Administration–backed loan. And it's not just because small-business loans require a lot of paperwork. Banks tend to favor larger deals, which are more profitable for them. So if you're a small-business owner hunting for a lender, it helps to know which banks aren't just talking the talk but are walking the walk when it comes to making small-business loans.

There are some surprises. While big banks still top the list when it comes to issuing greatest dollar volume of loans backed by the SBA and in the sheer number of loans made, some smaller banks are aggressively going after Main Street entrepreneurs.

Courtney Keating | E+ | Getty Images

Of the top lenders signing SBA-backed loans of $150,000 and under are Wall Street banks JPMorgan Chase (No. 1 on the list) and Wells Fargo, as well as some smaller players, including Celtic Bank and Zions First National Bank, according to SBA data for the 12-month period ended Jan. 31, 2014.

Larger banks still dominate when it comes to making loans of $1 million and under (which also include those loans under $150,000), but some smaller banks are gaining ground in that category, too. Take, for instance, this list's No. 14: Ridgestone Bank, a subsidiary of Ridgestone Financial Services, which received money through the recession-era TARP program.

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Big banks can be particularly stringent in lending to small business. Biz2Credit, a matchmaker between borrowers and lenders based in New York City, found in its January 2014 index that big banks using its platform approved 17.8 percent of small-business loans compared to small banks, which approved 50.9 percent.

SBA 7(a) Loan Program Top Lenders 2013 ($150K and under)

JPMorgan Chase Bank, National2,770$143,672,600
The Huntington National Bank2,528$110,142,000
Wells Fargo Bank, National Ass1,588$66,080,900
U.S. Bank National Association1,806$56,529,600
Manufacturers and Traders Trus844$51,441,500
Celtic Bank Corporation370$35,538,000
Compass Bank840$30,546,100
Zions First National Bank382$19,999,900
Branch Banking and Trust Compa316$19,076,600
Eastern Bank424$17,881,000
TD Bank, National Association354$17,398,100
Santander Bank, National Assoc267$15,124,600
First Niagara Bank, National A236$14,729,600
Bank of America, National Asso189$13,819,600
Wilshire Bank139$11,344,800

In fact, the data shows that it's only the larger-dollar-value small-business loans that grew in the recent 12-month period. In the SBA 7(a) loan program, used for working capital, the number of deals for $150,000 or less declined from 25,485 in fiscal 2012 to 24,923 in fiscal 2013, and loan volume stayed relatively flat at $1.4 billion.

The number of SBA 7(a) loans of $1 million or less rose in that same time period, from 40,496 to 41,694, with volume increasing from $7.6 billion to $8.5 billion.

This trend has created an opening for scrappy smaller players, including Salt Lake City, Utah–based Celtic Bank, which is lending across the country.

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"We definitely have stepped up our lending," said Craig Calafati, executive vice president of business development at Celtic Bank. "We made a very strong commitment to the underserved small-business community, particularly in making loans under $150,000."

To keep the loans flowing, Celtic Bank has built an online application into its website.

SBA loan approval overview

MAJPGMAPPVFY Approved Loans Approved Dollars
7(A)2013 24,923 $1,445,653,200
7(A)2012 25,485 $1,436,425,800
5042013 823 $90,087,000
5042012 950 $103,704,000
MAJPGMAPPVFY Approved Loans Approved Dollars
7(A)2013 41,694 $8,476,476,000
7(A)2012 40,496 $7,589,555,700
5042013 6,281 $2,511,922,000
5042012 7,570 $3,103,909,000

Small banks have a big financial incentive to go after SBA loans.

They profit from selling the loans they originate on the secondary market, where the deals are bundled and snapped up by institutional investors, such as pension funds, hedge funds, and private investors looking for safe deals.

"Banks make a very good premium of 12 percent to 16 percent," said Rohit Arora, CEO of Biz2Credit. "That's a big motivation for small banks to do these loans."

His prediction: "In the next six months, you will see more small banks coming into this space."

A pool party
The SBA's guarantee for the loans—which currently can be as high as 85 percent, depending on loan size—makes the deals attractive to institutional investors seeking low-risk opportunities. That, in turn, keeps money flowing into the banks.

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"It gives them the ability to make loans, retain liquidity and limit some of their risk exposure to the loans," said Craig Cline, managing director and head trader on the government-guaranteed loan desk at Coastal Securities, a financial services firm in Houston that is active in the trading, securitization and analysis of SBA loans and pools.

SBA 7(a) Loan Program Top Lenders 2013 ($1M and under)

Wells Fargo Bank, National Ass 3,059 $757,501,700
JPMorgan Chase Bank, National 3,593 $417,010,800
U.S. Bank National Association 2,341 $314,211,100
The Huntington National Bank 2,976 $290,772,000
Live Oak Banking Company 372 $193,146,600
Manufacturers and Traders Trus 1,146 $145,406,000
Compass Bank 1,023 $117,249,000
Seacoast Commerce Bank 213 $106,432,900
Celtic Bank Corporation 515 $104,877,100
Wilshire Bank 323 $96,010,000
Ridgestone Bank 207 $91,809,000
KeyBank National Association 469 $81,263,800
BBCN Bank 208 $76,623,800
Bank of the West 158 $74,962,200
SunTrust Bank 203 $74,676,300

Some small banks are also selling their loans to big banks, said Brendan Ross, president and portfolio manager at Direct Lending Investments, a private investment firm in Los Angeles that owns notes on loans made by alternative lenders.

"The [small] banks can't afford to warehouse them," said Ross. "They are like glorified brokers."

"It does allow us to recycle those dollars back out," said Eric Petersen, executive vice president of corporate development at Celtic Bank. "It allows an institution like ours to make a lot more loans than we would be able to."

Celtic Bank sells most of the loans it originates on the secondary market but remains the primary contact for servicing them, Calafati said.

Party like it's 2009?
How long small banks will have an appetite for SBA lending likely depends on the health of the secondary market, which stalled in 2009. "There were problems during the recession in the secondary market, but it has come back," said Bob Coleman, editor of the "Coleman Report," a trade newsletter for small-business bankers. "It is a very profitable lending product for some of these smaller lenders. If they do it right, they can make some money in it."

Banks aren't the only place to get SBA loans. They are also available through nonbank lenders and credit unions.

Nicole Zinn, owner of Rocket Electrics, an electric-bike shop in Austin, Texas, won an SBA-backed loan for $180,000 from Austin-based Amplify Federal Credit Union after working with an advisor at the Texas State Small Business Development Center to revise the shop's business plan and put the loan application package together.

Zinn founded the business in 2011 after losing her job in high-tech marketing during a corporate restructuring; it became profitable four months after it opened. "I didn't want to go back to a cubicle," she said.

Zinn applied for a loan to expand her inventory in July 2013, then saw her application stall during the federal government shutdown in October 2013. Finally, in November 2013, after the government reopened, Zinn won the loan, which she was more than ready to put to use in expanding the business.

"When the loan process takes so long, your need grows," she said.

By Elaine Pofeldt, Special to

(For more on the banks leading in lending under the SBA's 504 program—loans for fixed assets, including real estate and equipment—consult the charts on the following page.)

SBA 504 program top lenders 2013 ($150K and under)

Florida Business Development C 69 $7,284,000
Granite State Economic Develop 45 $4,230,000
Colorado Lending Source, Ltd. 26 $2,929,000
Mountain West Small Business F 23 $2,640,000
Michigan Certified Development 24 $2,610,000
Bay Colony Development Corpora 23 $2,549,000
Empire State Certified Develop 20 $2,366,000
Florida First Capital Finance 22 $2,357,000
Corporation para el Fromento E 20 $2,189,000
Twin Cities-Metro Certified De 16 $1,770,000
Minnesota Business Finance Cor 14 $1,726,000
SomerCor 504, Inc. 15 $1,678,000
Economic Development Foundatio 14 $1,648,000
PYMES Financial Partners, Inc. 19 $1,623,000
Capital Certified Development 14 $1,583,000

SBA 504 program top lenders 2013 ($1M and under)

CDC Small Business Finance Cor 308 $148,434,000
Florida Business Development C 356 $128,077,000
Mortgage Capital Development C 218 $99,106,000
Empire State Certified Develop 174 $79,677,000
Small Business Growth Corporat 158 $69,259,000
Florida First Capital Finance 167 $67,856,000
Wisconsin Business Development 156 $67,507,000
Colorado Lending Source, Ltd. 173 $62,023,000
Granite State Economic Develop 197 $59,657,000
Mountain West Small Business F 141 $50,671,000
Evergreen Business Capital 109 $50,186,000
California Statewide Certified 104 $50,000,000
SomerCor 504, Inc. 109 $44,385,000
Capital Certified Development 97 $41,658,000
Michigan Certified Development 111 $39,382,000