The A.R.C. program’s small business stabilization program that is administered by the S.B.A. has been criticized by many due to a slim profit margin for the banks, and the large amount of effort required on the part of the banks and the borrowers; so many larger banks have completely shied away from the program.
According to an article in today’s NY Times by Robb Mandelbaum, several small banks are making noise because they’ve decided to embrace the program and make it work. Robb writes:
“…The top three A.R.C. lenders are Chase, Wells Fargo, and SunTrust. But the fourth biggest is Zions First National Bank, a Western regional bank based in Salt Lake City, which made the country’s first A.R.C. loan back in June…And the No. 5 purveyor? Tiny Peoples Bank of Mississippi has made 145 loans. A community bank based in Mendenhall (population 2,553), Peoples has five locations in four towns in the middle of the state. It had but $192 million in assets at the end of September, according to data from the Federal Deposit Insurance Corporation; that makes it the 3,342nd largest institution operating in the United States (out of 8,109)…
…Peoples isn’t even an especially large lender of regular S.B.A. loans, though it is prolific for its size. In 2009, Peoples approved $8.2 million worth of loans and ranked 187th among S.B.A. banks, in the top 10 percent.
So what gives? Why is Peoples Bank of Mississippi an A.R.C. powerhouse? The Agenda put that question to the president of Peoples, Dennis Ammann. “We just thought it was a great program,” he said, “that would help businesses survive during this recession. Or it was just a really good service for those customers that needed a little cash-flow help during the tough times.”
The program, Mr. Ammann acknowledged, is “a lot of work.” Sometimes, he said, it can take up to a month to process a loan. Moreover, the bank absorbs the costs of securing collateral that some other banks pass on to their borrowers. “I think we probably lose money on the front end on these things,” Mr. Ammann said. “Over time, we feel like this is building our relationship with this small business, and if they survive and grow, they’ll remember that we got them into this program early on. If our customers do well, we’re going to do well over time.”…”
A community bank with a focus on supporting and building relationships with small businesses – now that’s something I can get excited about!
Susan Martin, Business Coaching