That is the title of an article in the WSJ last week and the quote is attributed to uber-banker Jamie Dimon.  His comment appears to have been taken out of context (he was talking about the new regulatory capital proposal), but the article goes on to discuss the precipitous drop in commercial lending our industry is seeing.

Our own experience at Gulf Coast Small Business Lending is different; our SBA loan pipeline is swelling.  In fact, we are seeing and closing some of the best loans we have seen in over three years.  There is a dichotomy between Wall Street and Main Street and we attribute our experience to the following:

1. Entrepreneurs are an impatient bunch:  After sitting on the sidelines for over two years, the operators we work with are simply tired of waiting. Business plans have been revised and revised again to incorporate slower-growth and the numbers work.
   
2. The outlook is positive:  While bumps in the road are expected (isn’t that always the case?), a slowdown is expected to be short and shallow. In my opinion, the Fed has done a masterful job getting us through the COVID crisis and bringing down inflation and I expect them to continue performing and getting us back to faster growth once inflation has been tamed.
   
3. Comfortable taking on “expensive” debt:  Related to point #1, borrowers are comfortable taking on debt with rates exceeding 10%, believing that the business can afford it and knowing that rates will begin to come down in a year or so, allowing them to refinance at a future date or in our case, take advantage of a variable-rate loan.
   
4. New SBA rules:  The US Small Business Administration (SBA), our partner in making the loans we make, has very recently liberalized its lending rules, making the loans more accessible to a wider audience and giving us the ability to structure loans we couldn’t do before.
   
5. Working with a good lender:  Yes, this last bit is a little self-indulging, but I really believe that having a good lender, backed by a strong financial institution like Gulf Coast Small Business Lending, is crucial to navigate the complexities of today’s economy and to take advantage of the new SBA rules.  Our team of SBA professionals is highly experienced and is prepared to assist entrepreneurs structure deals to their unique needs.

So don’t believe the headlines, or at least not all of them!  If you are passionate about buying or growing a business, buying owner-user commercial real estate, or consolidating ownership (buying out a partner, for example), there are lenders out there who would love to work with you.  Gulf Coast Small Business Lending is here and ready to help.

Today I have very brief but timely comments to share about the new SBA SOP changes.

A few months back the SBA published a new set of operating procedures (SOP); those changes took effect on August 1st, 2023. The changes are numerous and a little bit confusing. Because SBA is all we do here at Gulf Coast Small Business Lending we have invested the time to understand all of the changes.

Headlines are: first, we have incorporated the new features into our underwriting, packaging and closing procedures. Second, if you’re not sure whether your deal can benefit from the new SOP, give us a call and we will clear things up. Lastly, we will be holding a series of webinars starting in early September to explain the new SOP and its implications on the types of loans that are now eligible.

The principal objective of the new SOP is to increase access to capital by simplifying the process, removing certain restrictions, and leaving many underwriting decisions to our discretion. We are excited about the changes and look forward to implementing them.

Let’s talk about your next SBA deal!

I’m really pleased to share that in American Banker’s annual ranking of the 200 top-performing banks sized $2 billion to $10 billion by assets, our parent bank (Gulf Coast Bank and Trust Company) was ranked number 14 in the country. Among other factors, these rankings were determined by considering the banks’ ROAA, ROAE, NIM, NPA/total assets percentage, and core deposits/total deposits percentage.  You can review complete details in American Banker’s article “Profitability Rests on Strong Asset Quality,” published Monday, June 19th.

Although you may be familiar with our SBA lending division, you may not know that Gulf Coast Small Business Lending is part of a family of 19 financial service businesses across the United States collectively owned by Gulf Coast Bank and Trust Company.  Our SBA group (Gulf Coast Small Business Lending) is proud to be a division of Gulf Coast Bank and Trust Company. 

The President & CEO of Gulf Coast Bank and Trust Company, Guy Williams, had this to say in the opening letter of the Bank’s 2022 annual report (https://gulfbankannualreport.com/2022/#gcb-annualreport/01):

“Looking back at 2022 and considering the future of the banking industry, it is important to reflect on where we have been and are going. Last year, we had our best earnings, making $65 million, and expanded our footprint by acquiring a major leasing company in Minnesota. This acquisition will allow us to offer commercial leasing to our customers in Louisiana and throughout the United States.

However, for some peers in the industry, investing in long-term fixed-rate investment securities and long-term fixed-rate mortgages became problematic when interest rates rapidly increased to combat inflation. This resulted in a few banks going bankrupt due to the loss in value of their investment portfolios.

Fortunately, our bank did not invest our deposits in long-term loans or securities.  We balance our books to have minimal interest rate risk. This is simply good banking. 

Because we are both well capitalized and in balance concerning interest rate risk, we are able to support our customers with new loans while acting as a safe and sound place to make new deposits. As a result, we expect to continue growing this year and have possible opportunities for additional acquisitions.”

Our SBA lending division and, in turn, our borrowers, employees, and intermediaries benefit from being part of the Gulf Coast Bank and Trust family of companies.  When the bank, as a whole, is performing well it allows us to focus on what we do best – the superior delivery of SBA 7a loans nationwide.  Working with entrepreneurs to help them achieve their dreams is our passion.  When we say “good things are happening at Gulf Coast Small Business Lending”, this is what we mean.  We remain bullish about SBA lending and we have the support of our parent bank to pursue and deliver this singular focus.  And that is why I borrowed a quote from Guy Williams to use as the title of this blog “the road we travel together will be prosperous”.

If this sounds like a sales-pitch, well, it sort of is. We are excited!

There have recently been a whole bunch of new stuff announced by SBA which aims to simplify the process to apply and qualify for a loan and to increase access to capital. As we wait on the details (welcome to our world), we are especially excited about two of the new items.

First, the SBA is relaxing affiliation rules and doing away with the franchise registry. That’s a big deal around here. We are very active in franchise finance including startups, acquisitions and expansions and anything the agency does to simplify the process opens up opportunities for more entrepreneurs to pursue their dreams.

Second, which will probably make an even bigger impact on capital access is the ability to use SBA loans for partial equity purchases. We are still waiting on the exact wording, but the change in rules appears to open the door to another financing tranche that’s been effectively used in private equity for many years. If it does what we think it does, a daughter will be able to buy into her parents’ business with limited resources, assisted by an SBA loan. That’s just one example of the many, many opportunities that will now be available to small business borrowers!

Stay tuned for more developments and reach out to us to take advantage of these exciting changes. Our Gulf Coast Small Business Lending team is here to help.

Like many of you I’ve been glued to the financial news outlets over the past ten days, witnessing the SVB and Signature trainwrecks and watching for signs of contagion.  I think that both of those banks were operating on the edge (and went over), and I think that the actions taken by the regulators will proof us against contagion. But I have to admit to myself that I don’t really know.  

But inaction, even in the face of uncertainty, is not an option for a commercial SBA lender like Gulf Coast Small Business Lending. So, we reflect on what we do know (the basics), and continue to follow the rules and practices that have worked well for us in the past:

1. We don’t invest in what we don’t understand.  That’s where the risks hide, and if we don’t understand them, we can’t plan for them.  If you apply for an SBA loan from Gulf Coast Small Business Lending, please be prepared to explain to us what your business is since there is a good likelihood we don’t understand it as well as you do.
   
2. Once we understand the risks and determine that we can accept them, we make the move.  We are SBA lenders. There is no use for us unless we lend, and our job can be summed up as “understand the risks and make the investments.”  Not making loans is simply not an option.
   
3. We stay in our lane. Our product, the SBA 7(a), is specialized and highly regulated.  We have an SOP and the resources of the SBA to help us ascertain eligibility when we are stumped by a unique situation. So, we go all out to support borrowers, but only within the guardrails that are in place.  We stay firmly in our SBA lending lane.
   
4. We diversify, diversify, and diversify. And did I mention that we diversify?

My team and I are available to talk with you if you have questions or concerns or simply want to talk through an SBA loan scenario.  You can reach out to me through LinkedIn and my team through the Our People page on our website.