Last week I posted part one of this two-part interview with Newtek’s President of Business Lending, Peter Downs. During that portion we discussed small business lending in more general terms and briefly touched on how non-bank lenders like Newtek can accommodate small business owners seeking small business loans.

Part two of the interview delves a bit further into the small business loan process, providing a glimpse at what applicants can expect as well as how Newtek’s unique relationship with community banks across the country comes into play.

Many business owners seeking lending may prefer to work directly with their community credit unions because they’d prefer to support the little guy. What would you say to someone with that concern?

Peter: We’re actually a unique non-bank lender – we have the best of both worlds because of our relationships with community credit unions, which can be rare with non-bank lenders. Because we take referrals from community credit unions, applicants can continue banking locally, continue cultivating relationships with local branch employees, and continue to track exactly where their deposits are landing nightly – all while reaping the benefits that come with a non-bank lender like Newtek. In essence, they get the comfort of local banking matched with the accessibility offered by a non-bank lender with a non-burdened balance sheet. At this point, we’re working with more than 460 community credit unions nationwide and it’s been proven to be mutually beneficial.

Why might a small business owner experience a greater chance of success in securing financing with a non-bank lender like Newtek?

Peter: In contrast to the burdens other lenders have felt because of the residential and real estate effect, Newtek hasn’t been hurt by tarnished balance sheets. In addition, because we have the benefit of the SBA program behind us, and its 90% guarantee, we’re able to lend in a very broad manner as opposed to those who don’t participate in the SBA program. Because we’re able to lend under more flexible terms, our philosophy is to look at a lot of different types of businesses and industries that qualify under the SBA program, including startups and young companies as well as older companies. There are lots and lots of rules and regulations that SBA participants have to abide by, which is exactly why many lenders don’t participate. Because small business lending is all we do, we’re experts in the SBA field and have the expertise it takes to make it work.

Tell me a bit about the lending process…what can a business owner expect once they’ve contacted Newtek to get the ball rolling?

Peter: Once a business owner contacts us, they’ll be assigned to a dedicated business service specialist whose sole focus is small business lending. The first step is the pre-qualification assessment, which takes about 20 to 30 minutes over the phone. This is done to verify that the business owner is eligible to take advantage of the SBA program. During this phase the specialist will pre-populate all of the necessary fields of the application documents. If together they discover that yes, they are indeed qualified and it’s worth the business owner’s time, effort and energy to move forward the assigned specialist will advance the application. All the applicant will then have to do is sign and return the paperwork with the supporting documents and we take it from there.

Once the completed package is in the underwriting phase, the initial approval process takes 5 business days. We then add a closing specialist to the team to walk the applicant through the closing process to ensure all of the legal documents are in place. We then close it, and fund it with a borrower. The nice thing about it is that each applicant will have one dedicated specialist to walk them through the entire process.

How many small business loans did Newtek facilitate in 2009?

Peter: We did $20M worth of SBA lending in 2009, and we’ll do about $50M to $60M in 2010.

Well, I appreciate your time in not only providing a detailed overview of the state of business lending, but a closer look at how non-bank lenders fit into the equation. Thanks so much, Peter.

Peter: My pleasure.  I’m happy to answer any additional questions that may pop up.

So here’s your chance. For anyone looking to initiate the process, or anyone who might even be toying with the idea of growth via SBA lending, do you have any additional questions for Peter?

Is there anything we didn’t touch on during part one and part two that you’re curious about? Don’t be shy. Either shoot us an email at community@newtektechnologyservices.com or drop your questions below in the comments section. We’d love to hear from you.

For more information about Newtek’s small business financing services, click here.

There’s been a lot of discussion in 2010 surrounding the role the small business community plays in the current economy – specifically, how small businesses could very well be the key to pulling us out of the recession.

The White House has gone to some great lengths to ensure those small businesses looking for funding are able to have a fair shot in accessing those funds – in fact, the Small Business Administration (SBA) stimulus extension was renewed yet again. Of course, the hope is that of those small businesses who receive SBA Loans, all will not only invest in their businesses, but hire more employees which will hopefully help to make a dent in the staggering 9.7% unemployment rate.

Keeping up with all of the emerging news from the small business sector can be daunting, so I turned to Peter Downs, President of Newtek Business Lending. Not only did Peter help to shed some light on the situation, but he also clarified how non-bank lenders factor into the mix…

Peter, can you briefly clarify how the recent stimulus funds affect the overall SBA lending program?

Peter: The SBA program has been around for 50 years – it’s always been funded. With the new stimulus funds, all that means is that there are additional funds earmarked for small business lending in addition to what has existed in the past. The stimulus also guarantees 90% of the loan rather than 75% percent of the loan as in years past. That 15% is crucial as it’s covering a greater amount of the loan. If for some reason the borrower defaults, the SBA steps in and actually pays back the lender, thus, minimizing the risk to the lender.

Let’s talk about how this plays out on the front lines. Would a small business owner typically approach a non-bank lender like Newtek for funding?

Peter: In the past I would have say the answer is “no.” Simply because small businesses tend to utilize three different things to fund their business:

1. First, they use the equity in their home because it’s cheap and easy for them to use, and it’s something they own.
2. Next, they’d probably go to their local bank where they had a deposit relationship and ask them for some kind of financing or line of credit against their business assets.
3. Lastly, they would probably consider credit card financing.

That was all in the past though. Most people no longer have much equity in their homes – if they do it’s very hard to get a loan that way as credit criteria has changed significantly. Because banks’ balance sheets have been beaten up so badly by all of the problem loans they’ve serviced, they’re more focused on managing the current situation rather than offering new lending. Obviously credit cards have gone by the wayside because they’re unsecure, and some of the changes Congress has made in how you can charge late fees have made it less profitable for banks and others to issue cards.

Essentially, the economy has wiped out most of the “old ways” of securing funding and so small business owners have had a much tougher time accessing funds. Which is where non-bank lenders enter the picture.

Which leads right into my next question. Why is a non-bank lender a good alternative?

Peter: Non-bank lenders, like Newtek, don’t have balance sheets laden with real estate loans that didn’t perform, don’t have weird investments on their books like large banks, and generally aren’t weighed down by complications. What’s more, we have access to the SBA program, which is being pushed forward aggressively as a viable solution for small business owners. All of these factors make us a unique option for lending.

Be sure to check back for the conclusion of this series when we discuss non-bank lending and its community bank partnerships next week.

In the meantime, we want to hear from those of you who have attempted to secure small business funding recently. Were you successful? Also, have you considered non-bank lending as an option? Tell us about your experience.