Tag Archives: loans

loan

Say No to Predatory-Driven Risky Loans

While Arizona recovers from an economic crisis rooted in predatory lending practices, a bill before the legislature proposes another round of risky loans not too far removed from the horrific payday-lending loans now mostly a good-riddance memory.

HB 2526 would increase interest rates and fees on consumer loans of $3,000 up to 36% and double loan-origination fees from $75 to $150, a troubling proposition leaving Arizonans footing the bill for consequences of high-cost debt while benefiting primarily out-of-state lenders.

HB 2526 essentially allows the loans without regard to a borrower’s ability to repay. And, as if fees and interest weren’t enough, these loans come stacked with more fees for nearly useless insurance products providing little to no benefit to borrowers.

It‘s easy to see how a loan pitched as a productive quick fix is actually designed to sink borrowers into inescapable high-cost debt through a despicable cycle of refinancing and flipping.

The proof is in the lenders’ own data. Companies making these types of loans report that more than 70% of these loans have been refinanced from existing loans. This tell-tale sign of predatory lending – flipping borrowers over and over to collect new fees – became all too familiar during the mortgage crisis.

This is also an obvious sign that these high-cost consumer loans are not structured to be affordable, even at the outset. Nor do they encourage borrowers to graduate to cheaper forms of credit or other means of addressing financial stress. Instead, once lenders make the first loan based on these unsustainable terms, the result is typically a long-term debt cycle making it virtually impossible to build assets for the long term.

In addition to high costs and churning, equally troubling is that these loans will likely be bundled and sold right back to Wall Street.

Finally, while bill supporters assert that expanding this type of unsafe lending will curb abusive car-title loans, adding another predatory product to neighborhoods already saturated with similar no-out options is not the answer.

If the legislature wants to address car-title-loan abuses, then do it directly and we’ll stand behind and support those efforts.
But making weak excuses to deflect focus from a bill that would allow predatory lenders to push already-struggling Arizonans deeper into debt is, at the very least, insincere.

For these reasons, AARP, the Center for Economic Integrity and Community Action Agencies, which provide support and services to the newly poor and the working poor, along with many other groups urge Arizona legislators to prevent predatory lending by opposing HB 2526.

Cynthia Zwick is executive director of the Arizona Community Action Association. For more information, visit www.azcaa.org.

wells fargo - home for veteran

Initiative Helps Veteran-Owned Small Businesses

Veterans who own small businesses in Arizona can save up to $3,000 by tapping into a new loan program called VetLoan Advantage.

The program, offered by CDC Small Business Finance, features rebates and fee waivers associated with SBA-504 loans (for commercial real estate purchases) and Community Advantage loans for working capital, equipment purchases and other needs.

According to the U.S. Small Business Administration, veterans are at least 45 percent more likely than those with no military experience to be entrepreneurs, and often times face challenges in raising capital or getting a conventional loan.

“Veteran-owned small businesses employ nearly 5.8 million people nationwide, making the need for loan assistance vital to our recovering economy, said Chris Bane, loan officer with CDC Small Business Finance. “These programs are our way of saying thanks to vets for their honorable service.”

The VetLoan Advantage programs in Arizona by CDC include:

SBA-504 – for purchasing commercial/industrial buildings or large equipment.  CDC will issue a cash rebate up to $3,000 for any funded loan to help veteran owners offset loan expenses.  The SBA-504 loan offers a low-down payment (typically 10%) and long-term fixed rates (now under 5%).

Community Advantage – provides up to $250,000 for working capital, equipment, inventory, tenant improvements and business acquisition.  CDC will waive the packaging fee for veterans, a savings of up to $2,500.

For more information visit: http://cdcloans.com/small-business/vetloan-advantage/

CDC Small Business Finance is the nation’s leader in SBA-504 loans as well as a leader in helping start-up and emerging small businesses via a variety of other SBA loan programs.

ty

3 Reasons the Bank Says No

If your application for a small business loan has been denied, you are not alone. In fact, only about 10 percent of the small business borrowers who apply at the bank leave with a loan. Although the bank may give you a song and dance about why you were denied, it usually boils down to some very basic things:

You haven’t been in business long enough: Most banks don’t want to lend to companies that are in the first year or two of business. The success rates of a business that is over two years old are much higher and your banker, by his or her very nature is highly risk averse. They usually won’t take a risk on a very young company. You should also know that they will likely use your company tax returns to determine how long you’ve been in business. With that in mind, even if you don’t have much to report, file your returns starting with the first year to establish your company’s age right from the start.

Your personal credit is bad: Even if you’re trying to establish credit as a business, especially in the beginning, your personal credit and your business credit are pretty much joined at the hip. In fact, unless you have stellar business credit, you’re likely going to have to agree to a personal guarantee. In other words, you will need to cover the debt personally if your business fails to honor the debt. I recently heard from a small business borrower who defaulted on a very large business loan. The commercial property used as collateral had devalued over the last couple of years to the point where seizing it would only repay 50-60 percent of the loan balance. His attorney told him he should prepare for the worst—the bank will likely take everything he owns to repay the debt. On the other hand, if you have incredible personal credit, that sometimes frees up cash for a young business. Like it or not, maintaining your personal credit is just as important to a Main Street business as keeping a good business credit score.

You do business in a sketchy industry: By sketchy, I mean, highly volatile or erratic. Just like some banks specialize in particular types of industries, they will avoid others. The restaurant business is a good example. Because so many new restaurants fail many banks avoid lending to restaurants at all. If you do business in a highly niche or volatile industry you’ll either need to bootstrap your funding for the first few years to demonstrate that your business is viable before you’ll have any success at the bank, or try to find a bank or banker that specializes in lending to companies like yours. You might have to bank out of town (or even in another state), but building a banking relationship with a bank and banker that really understands your business is a good idea and technology, in many cases, pretty much makes bank location irrelevant anyway.

Does this mean that you’re stuck among the 90 percent that walk out of the bank empty handed? Not necessarily. There are a lot more options today for small business financing than just a few short years ago. What’s more, competition among alternative financing is making rates and other terms more and more favorable for small business owners. Of course even alternative lenders are interested in how long you’ve been in business, your personal credit, and your industry—they are simply willing to accept more risk. You should also be aware that the cost of capital could be a little higher with an alternative lender. Consider it  the cost of being a little more risky loan than what your local banker might accept.

At Lendio, we match thousands of small business owners to financing every month—some even end up with a local bank. Francis Bacon said, “Knowledge is power.” Knowing what your banker is looking for and what might be a cause for rejection makes it possible for you to demonstrate you have a plan to either mitigate his or her concerns or help you focus on an alternative funding source that might offer a better chance for success.
Small business evangelist and veteran of over 30 years in the trenches of Main Street business, Ty Kiisel makes small business best practices, tips and advice accessible by weaving personal experiences, historical references and other anecdotes into relevant discussions about leading people, managing a business and what it takes to be successful. Ty also shares his passion for small business every week on Forbes.com.

Shea Homes Arizona Sales Increase, Optimistic About Housing Recovery

The jury is still out about the national housing recovery, but Shea Homes Arizona is noticing a pickup in its sales during the first four months of the year. With three new home communities that have opened since January and three more that will be announced soon, Shea Homes Arizona has already outpaced its 2011 YTD sales by 40%.  During the housing slump, Shea averaged 5 home sales per week in 2010 and 2011 and currently is averaging more than 8 home sales per week already this year.

“We are seeing the same amount of visitors to our communities, but more are buying homes,” said Ken Peterson, VP of Sales and Marketing for Shea Homes. “We think a couple things are taking place, first, more people are becoming eligible to get loans again after going through foreclosures or short sales and second, the resale inventory is so low right now that people are getting frustrated by bidding wars.”

The most interesting trend Shea Homes has seen lately has been the final sales in communities that can now be closed out. La Quintana, La Mirada, Painted Trails, Entrada, Copper Hills, Lost Canyon and Cabrillo Canyon have all just recently closed over the past few months. Escala at Seville and Foothills at Layton Lakes only have one or two remaining model homes or spec homes, bringing the total Shea Homes communities to 12. The SPACES product that opened in early 2010 has only two lots left, in addition to its models, and a second SPACES at Evans Ranch community will be opening very soon.

“Sales are always a good indication of a recovering housing market, but we also added two new product lines this year- duplexes and triplexes and also acre lot luxury homes, which helps us bring in new buyers that we might have missed before,” said Peterson. “We are pretty optimistic for now and happy about the trends we are seeing in Arizona.”

For more information on Shea Homes, visit Shea Homes’ website at sheahomes.com.

banking program

National Bank Of Arizona Introduces New Medical Banking Program

National Bank of Arizona’s Wealth Strategies division is pleased to announce the launch of the new Medical Banking Program at National Bank of Arizona.

The banking program introduces a new opportunity to service affluent medical professionals in Arizona with the launch of a new loan program providing a 95% loan-to-value option on a new home purchase or the refinancing of an existing home. This banking program is exclusive to clients who qualify for Executive Banking or Private Banking with National Bank of Arizona. Both divisions within the organization will be dedicating resources to develop and grow this niche segment of business.

Suzy Powell will move to the position of Medical Banking Relationship Manger for the organization’s Executive Banking division. With more than 30 years of experience, Powell brings a broad range of banking knowledge to the position, including information in trust services, estates and private banking. In her new role, Powell will be responsible for acquiring new physician relationships for National Bank of Arizona.

Paula O’Neal Wichterman recently joined National Bank of Arizona as Vice President for Private Banking at the Gainey Ranch location. In this role, she is responsible for increasing NB|AZ’s focus on the physician banking market, in addition to contributing to the Private Bank’s overall strategy, growth and performance. Before joining NBAZ, Wichterman spent the last nine years in various advisor roles for MidFirst and Compass Bank in both private banking and credit administration.

With continued development of this arm of business for National Bank of Arizona, medical professionals will have the opportunity to work closely with a financial planner to assess their current financial plans and future goals; providing an important growth strategy for the organization. Similarly, National Bank of Arizona’s Mortgage Department also will offer a Physician 30-year loan for medical professionals.

For more information on National Bank Of Arizona and their new medical banking program, visit National Bank Of Arizona’s website at nbarizona.com.

National Bank of Arizona, APS Energy Efficiency Partnership

APS Home Performance Program Provides Loans For Homeowners Energy Efficient Improvements

National Bank of Arizona has partnered with APS to provide an affordable financial incentive for APS customers to renovate their homes with energy efficient improvements. It’s called the APS Home Performance with ENERGY STAR® program.

The program was started more than a year ago and at the time was only available to schools and small businesses. But now, the partnership has  opened up so all APS residential customers have the ability to benefit not only the environment, but their wallet as well.

“We’re pleased to continue our partnership with a company like APS that views environmental sustainability as a top priority for our community,” says Craig Robb, executive vice president of National Bank of Arizona. “Our business energy financing program has been incredibly successful and, we’ve recognized the need to offer the same initiatives in the residential sector, as well.”

Photo: photos.com

The APS Home Performance with ENERGY STAR® program allows homeowners to receive loan amounts ranging with a standard rate of financing, from $1,000-$15,000 for qualifying energy efficiency improvements. Loans that include improvements for solar water heaters are available up to $20,000. The energy efficient improvements included in the partnership program range from duct sealing and shade screens to heating, ventilation and air conditioning (HVAC) replacements, solar water heaters and more.

To get started, customers need to schedule their $99 (regularly $400) APS Home Performance with ENERGY STAR® Checkup with a participating contractor. Customers can locate a contractor by calling (877) 850-8358 or visiting www.aps.com.

Learn more about the APS Home Performance with ENERGY STAR® program and financing details by visiting any one of National Bank of Arizona’s 76 branches statewide or calling (866) 277-5605 for more information. Customers can also log on to www.nbarizona.com or www.aps.com/financing.

Many Arizona Small Businesses And Banks Say A Federal Loan Program Isn’t Needed - AZ Business Magazine Nov/Dec 2010

Many Arizona Small Businesses And Banks Say A Federal Loan Program Isn’t Needed

President Barack Obama has signed a bill that aims to increase small business lending. But it’s not exactly popular among Arizona’s small companies and community banks. They question whether a multibillion-dollar loan fund created by the legislation will achieve its goal.

The Small Business Jobs and Credit Act of 2010 will establish a $30 billion Small Business Lending Fund within the U.S. Treasury. The Treasury will use that money to purchase preferred shares in small- to medium-size banks that voluntarily participate in the program, injecting new capital that the banks would be encouraged to lend to small businesses. The more loans the banks make, the lower the dividend rate they pay the Treasury.

“As a small business owner, I am allergic to government intervention,” says Charlie O’Dowd, president of Westcap Solar, a Tucson company that sells and installs solar photovoltaic and solar hot-water systems. “I don’t think that this legislation is going to be any more effective than the TARP (Troubled Asset Relief Program) legislation. In this economy, it’s not that there isn’t money to be borrowed. It’s qualifying for the loan that’s the problem.”

The new law also gives John P. Lewis a bad taste in his mouth. Lewis is president and CEO of Southern Arizona Community Bank in Tucson, and a member of the FDIC’s Advisory Committee On Community Banking.

“Last January, the committee had a robust discussion (on the legislation),” Lewis says. “The committee said, ‘We don’t want to be a part of this.’ Community banks don’t need the additional capital. I have more money than I know what to do with. I need qualified borrowers.”

O’Dowd and Lewis describe a situation that is frustrating for both and that neither believes government policy will resolve. O’Dowd says small businesses’ sales are slow, impacting their ability to qualify for loans. Lewis says his loan demand is flat because there are fewer qualified borrowers.

The Arizona Small Business Association points to a wary small business community that’s in no mood to take on more debt. Earlier in the recession, small businesses tried in vain to obtain bank loans, but now they are in survival mode, says Donna Davis, the association’s CEO.

“Bank loans are not at the top of their list now,” Davis says. “Some businesses have lending fatigue. They just gave up (trying to get loans). Now they are focused on lack of sales. If sales don’t pick up, if work doesn’t pick up, they won’t seek credit. If they can boost sales and profits, then they can justify hiring and expanding.”

One outside observer sees a triumvirate of doubt that the legislation will not mitigate. Dennis Hoffman, professor of economics at Arizona State University’s W. P. Carey School of Business, says this recession has caused consumers, businesses and banks to lose their confidence. Lacking the good credit risk they saw five years ago, banks have “pulled in their oars,” Hoffman says. Creditworthy businesses fret so much over the economy, they don’t even apply for loans. Recession-scarred consumers remain stingy.

“We need to climb this wall of worry to get out of this morass,” Hoffman says. “This is a market-based, private-sector issue that will have to work itself out.”

Gail Grace, president and CEO of Sunrise Bank of Arizona headquartered in Phoenix, doesn’t sense much support for the legislation among Arizona’s banks, and wonders how many community banks would be able to participate.

“Community banks in Arizona are stressed and many may not even qualify for this program,” Grace says. “You will still have to have a fairly healthy bank to qualify for this.”

Not everyone has a dim view of the law. Robert Blaney, Arizona’s Small Business Administration district director, notes that the law will increase the SBA’s loan guarantee from 75 percent to 90 percent, easing banks’ risk on those loans. The law also will lower fees and raise the SBA’s maximum loan amount from $2 million to $5 million. There are thousands of small business owners nationwide that were waiting for the lending bill to become law, Blaney says.

One of those is Benefits By Design, a Tempe company that sets up health benefit plans for small businesses. The company’s president, Kristine Kassel, says there is a need for loans and it would be helpful if just two community banks expanded their small business lending. She adds that any amount of new credit that can be extended to small businesses is a good thing.

Banks interested in acquiring low-cost capital might be attracted to the Treasury fund and they might be enticed by the built-in incentives to direct new-found capital into small business lending, says Dan Stewart, Arizona market president for Mutual of Omaha.

But then he echoes what others say: “The (law) doesn’t encourage banks to take on more credit risk, so qualified borrowers are the key.”

    By the Numbers
    The Small Business Jobs and Credit Act of 2010



  • Establishes a $30 billion Small Business Lending Fund within the U.S. Treasury
  • Treasury will use money to purchase preferred shares in small- to medium-size banks that voluntarily participate in the program
  • SBA’s loan guarantee would increase from 75 percent to 90 percent
  • The SBA’s maximum loan amount would increase from $2 million to $5 million

Arizona Business Magazine Nov/Dec 2010

Arizona Business Magazine's Editor-in-Chief Janet Perez

The Buzz on AZNow.Biz – September 20, 2010

It’s another exciting week at AZNow.Biz. Arizona’s credit unions are asking Congress to allow them to make more loans to more small businesses. This week also marks the debut of our workforce columnist, Marcia Rhodes, from the recruitment firm WorldatWork. Rhodes asks the question, are you a good boss?  Find all this and more at AZNow.Biz.

wood beam

As Commercial Real Estate Sector Prepares To Be Hit By Recession, Leaders Should Become Proactive

The headlines today have focused on the bailout of the banking industry and the housing market’s severe contraction. Not a lot of attention has been paid to the commercial real estate sector. As with all business cycles, there is a flow-through to the various sectors. The fact that we have lost more than 1 million jobs this year, and have had a severe reduction in housing values and record foreclosures, can only bode ill for retail and other commercial areas.

Since retail traditionally follows housing, how can it not be negatively impacted when fewer homes are being built and more and more people can barely afford their current homes? In recent months Mervyn’s, Linen ’n’ Things, The Shoe Pavilion and Circuit City have all announced either closing of some or all of their stores. The larger tenants oftentimes are the anchors of some of the smaller centers. There is usually a cascading effect on other tenants who feed off the traffic generated by the anchors. We have many clients who talk about tenants leaving in the middle of the night.

At this time, most of the bankers we have talked to have stated that they have few commercial projects on their radar, but most admit this is the next big area to hit them and the economy in general. Are they prepared and how can the lenders minimize the fallout from this?

We would like to outline some of the steps that lenders and others can take to be proactive in the process. Some lenders we have talked to take the position that they will sell the returning assets “as is,” so they do not incur anymore costs on a bad loan. This shortsighted approach will end up costing these lenders and their shareholders money.

We advise lenders to do a thorough analysis of the project in such areas as:

  • What is the current situation with the permits, utilities and other entitlements? This may unfortunately turn up information that the bank should have known about before it made the loan or kept funding it. There is a good case to not have the same people who approved the loans involved in this process. Some of these items may involve minor fixes that could make the project more marketable. For example, assume the contractor had not ordered some of the utilities, which usually involves a long lead time. By the bank being proactive (after they take the project back) and ordering some of the utilities, the project would have more appeal for a potential tenant versus sitting on the asset and waiting for things to happen. A new potential owner may have a tenant, but he needs to get him into the space within a set period of time. If the bank has done nothing but sit on the asset, the buyer may go to a project where he can get his tenant in immediately.
  • What is the status of payments to the contractors versus how much work has actually been performed? Is the project really 50 percent complete but you have paid out 60 percent, for example? Where are materials stored if ordered and paid for?
  • Another problem is when banks have the same people or departments evaluate the project. They are the ones who may have missed some of these issues to begin with. You want a fresh look at what you have. It is difficult to want to spend more money on an asset that will be a loss — but if you can do a proper evaluation of what you have, you may recoup quite a bit of additional money.

Why do Realtors for homes recommend cosmetic fixes to make them more saleable? Because they work. But the real estate owned (REO) departments of many banks do not want to incur additional costs in these areas. We like to assist the lenders by also giving some ideas on how to reposition the property. When clients come to us for an initial project, we frequently work with them on site plans. Even on a project that is partly or fully built, you can analyze how it can be revitalized and repositioned. It may have been poorly designed to begin with. Smart buyers are going to be looking at these ideas before they make an offer. If the lender hires someone to give them some of these ideas it can be very helpful information real estate brokers can use in marketing the asset.

We know of certain retailers developing new concepts to fit into smaller spaces to take advantage of a good location. If you have prepared some estimates of what would be involved to reconfigure the space, that makes it easier on the potential new owner and his tenant.

In summary, retail should be the next area to seriously impact the balance sheets of lenders. Most lenders have not had departments devoted to this problem because the market has been good for so many years. It is important to hire experts who can give an unbiased view of the asset and what can or cannot be done with the project. When a lender uses the same people or moves some of its people over they may not have the expertise to properly analyze the project to obtain the best possible value from it upon a sale.

buyers market

Real Estate Companies Are Seizing Opportunities During The Bust

With dark clouds hanging over the country’s economy and property prices tumbling, many people consider the idea of buying real estate absurd. Yet Valley real estate experts contend right now is the best time to buy.

Jeff Pavone, principal of Commercial Plus in Scottsdale, says smart, experienced commercial real estate investors only buy property when the market is down and no one else is buying. Buyers today are sophisticated, have cash and are looking to pay a good price for quality, he says.

“A year ago everyone could buy real estate and get financing,” Pavone says. “But today, it’s only qualified buyers with a strong portfolio, which puts the buyer at an advantage.”

In spite of economic hurdles, Commercial Plus is still closing deals weekly and getting financing done for clients. It recently closed a deal on a property on Seventh Street and Camelback Road that sold for 20 percent less than last year. Pavone says the buyer was qualified to close, so he obtained 80 percent financing and closed right away.

UTAZ founder Craig Willett says his company stopped buying properties four years ago because prices were too high. Now they are back in the game and in negotiations to buy a number of parcels near hospitals in the Southeast and West Valley. UTAZ specializes in developing professional office villages for small businesses. Since many small business owners have a hard time getting financing, UTAZ offers a lease with option to purchase. Willett says that model used to be 15 percent of the company’s business, but is now 45 percent.

“Leasing with the option to purchase makes a lot of sense in today’s market,” Willett says.

Pollack Real Estate Investments in Mesa is also buying again after taking a three-year hiatus. Founder Michael Pollack is shopping around for multiple commercial properties from single sellers in California, Arizona and Nevada. The company’s focus is redevelopment and renovation projects. Pollack Investments currently owns, operates, manages and leases its own portfolio of more than 100 commercial and industrial properties in California and Arizona.

“Investors are getting more for their money right now than a year or two ago, so it’s a good time to buy,” Pollack says. “But it’s harder to get loans unless you have good credit and put down more money, which I support wholeheartedly.”

Pollack says great buys exist today on land in Arizona and in all sectors of real estate. However, buyers need to look hard for quality opportunities and analyze the numbers, since many sellers want the same price today that they could have gotten three years ago.

“We put a property in Mesa up for sale a couple months ago and sold it the same day,” Pollack says. “So, if a property is priced realistically and reflects the conditions of 2008, it sells.”

Local experts agree that residential property is also a good investment right now, especially homes being sold by banks and by homebuilders forced to sell standing inventory. Greg Vogel, chief executive officer of Land Advisors Organization, says many of these properties are back to pre-boom prices, so they’re a real bargain.

Phoenix-based investment firm Najafi Companies bought Trend Homes in June for $86.5 million. The deal allowed the homebuyer, which reorganized under Chapter 11 bankruptcy, to grow and expand its Valley operations. CFO Tina Rhodes says Najafi is committed to homebuilding in Arizona and looks to invest in companies with strong management teams and long-term potential.

Paradiso Development Corporation is moving forward on development plans for Paradise Reserve, a 40-acre, exclusive, luxury residential enclave bordering the Phoenix MountainPreserve on Lincoln and 40th Street in Paradise Valley. The desert retreat has 14 hillside estate lots ranging in size from one to three acres. Lot prices are $2.7 million to $5.4 million.

“The 14 lots at Paradise Reserve are the crown jewels of our project,” says Scott Schiabor, principal of Paradiso Development. “They are rare and unique, and that will help maintain their value and attract investors. A big part of our market is also immune to economic changes, so while we expect some downturn due to the economy, based on the rarity of the lots, location and our target market, we expect sales to go extremely well. For many people it is still a good time to buy real estate and make quality investments.”

Money Flow

State-Chartered Banks Are Still Lending Despite The Credit Crunch

The credit crunch is gripping much of the nation, but Arizona banks are still lending money and most are well-capitalized to weather tough economic times. The state’s core capitalization rate of 10.31 percent is well above the national average of 7.89 percent. That means Arizona banks have a good cushion to ride out the mortgage-induced banking crisis.

Arizona has approximately 83 banks, and of those 33 are state chartered. It also has roughly 58 credit unions and 26 are state chartered. Felecia Rotellini, superintendent of the Arizona Department of Financial Institutions, which oversees all state-chartered banks and credit unions, says state-chartered banks were not involved in subprime mortgage lending, so the mortgage meltdown is not impacting them. But capital drying up and lack of funds for borrowing, which precipitated the federal government’s $700 billion Wall Street rescue package, do impact state banks and make it more difficult for them to do business. Thus, state regulators across the country are closely monitoring the policies and proposals coming out of the U.S. Department of Treasury to make sure the advantages large national banks acquire from Treasury Chief Henry Paulson’s plan have equal impact on state community banks.

“As a result of subprime mortgages, foreclosures and the drop in property values, banks are seeing a reduction in profits and asset quality,” Rotellini says. “But I believe our state-chartered banks are well-managed and well-capitalized to weather the storm. It’s a matter of good management and reserves.”

In September, National Bank of Arizona’s strong capital position enabled it to acquire the FDIC-insured deposits of Silver State Bank’s Arizona offices in Tolleson, Chandler, Sun City and Scottsdale, after federal regulators took over the Nevada-based bank.

National Bank of Arizona’s plan is to merge all Silver State offices into its own nearby branch locations. National Bank of Arizona President and CEO Keith Maio says the bank is currently lending money to small and mid-sized businesses and for commercial real estate projects. But unlike a few months ago, the bank now has a stronger pre-leasing requirement on commercial real estate and a slightly higher credit quality hurdle for small business transactions. The bank also takes into consideration whether a prolonged economic downturn will significantly affect a business and whether management has the ability to maneuver a company through a protracted economic slump. Assessing management is critical, Maio says, because good managers have a solid business plan, they don’t look for excessive leverage and they can run a business successfully through good times and bad.

“Whether you’re an individual, business or bank, you can weather the storm if you have adequate capital,” Maio says. “Our goal is to work with customers the best we can while preserving our capital for future opportunities. That doesn’t mean we’re not making loans. It means we’re going to be judicious about capital. For the last eight to 10 years, there’s been too much leverage in both the business and consumer sectors and that’s what’s caused this financial crisis in its simplest form. Credit was too easy and too cheap. Now it’s harder to get and more expensive.”

The spiraling economic downturn has been a blessing in disguise for Bankers Trust Phoenix, a wholly-owned subsidiary of the $2.5 billion Midamerica Financial Corporation. The bank opened in January with $15 million in capital and a clean balance sheet, enabling it to build relationships with local real estate professionals and lend against high-quality assets that are strategically well-positioned to ride the economic upturn early in the next cycle.

“The fact that we missed the boom of the last several years has turned out to be an advantage for us,” says Patricia Rourke, president and CEO of Bankers Trust Phoenix. “As a newcomer in the market with no troubled credit and nothing in our portfolio, we were ready and able to lend when developers and real estate professionals were being turned away from other local banks.”

Harry Mateer, president and CEO of Altier Credit Union in Tempe, says credit unions have also been affected by the country’s financial crisis, but to a lesser degree. Credit unions have strict investment policy guidelines that prohibit them from entering into many of the lending areas of banks and other financial institutions. They focus on specific areas of lending, such as auto loans, home equity and credit cards.

“We’re currently seeing some liquidity shortages in the system,” Mateer says. “And I’ve heard this from other credit unions around the state, too. Members don’t have as much to save so there’s not a lot on deposit. Nevertheless, we’re focused on helping members in light of the economy and working with them when they have difficulties. People can still get loans, but we’ve changed our loan to value requirements to be a little more conservative. We’re now doing 80 percent loan to value, not 85 to 90 percent. And I think that’s what’s being done across all banks and credit unions.”

As a result of the mortgage-induced banking crisis, Arizona legislators passed a law during the 2008 legislative session (SB-1028) requiring all loan officers of mortgage companies in the state to be licensed after 2010. The Arizona Department of Financial Institutions is developing the licensing system for the state. Arizona has approximately 8,000 to 14,000 loan originators that will need to be licensed.

“Over the past few years, there’s been a breakdown in education and training of loan originators in Arizona who explain nontraditional loan products to consumers,” Rotellini says. “A lot of borrowers got into a loan product they didn’t understand and couldn’t afford over the lifetime of the loan, and the loan originators didn’t carry out a loan transaction that was suitable for the borrower. Loan originators also made more commission on option ARM (adjustable rate mortgage) products that over time yield higher interest rates, so conventional loans and FHA loans fell out of favor.”

The Department of Financial Institutions recently investigated a case that resulted in a Phoenix man losing his home. The man was put into an option ARM product with a teaser rate he could afford, even though he would have qualified for a VA loan. In time, the loan adjusted to a higher interest rate and the man couldn’t afford to make his house payments. When the man complained, the loan officer threatened to harm him, so the Department of Financial Institutions intervened. Unfortunately, it was too late. The man had no money to refinance, his credit was destroyed and he lost his home.

“Requiring loan originators to be licensed raises the level of accountability,” Rotellini says. “It’s going to improve the whole mortgage-lending experience for consumers and provide assurance that the loans they enter into will not default and are legitimate. Of course interest-only products will still be available, but they will no longer be abused.”

Big money tight times 2008

Big Money, Tight Times-SBA Loans Can Help

By Don Weiner

It may be true that numbers don’t lie, but they don’t always tell the whole story. When the 2008 fiscal third quarter ended June 30, statewide Small Business Administration-guaranteed lending showed a 25 percent decline from 2007 in both total loans and dollars lent, according to the Arizona District Office.

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In fact, District Director Robert Blaney says numbers have been dropping throughout the fiscal year, which is indicative of a slowing economy and business owners holding back.

“I think that we’re feeling the effects like everybody else,” he says. Even active SBA lenders have noticed a slowdown.

“The customers are not expanding as much,” says Dee Burton, an Alliance Bank of Arizona senior vice president dealing with SBA and commercial lending. “The customers are, you know, a little bit leery and they’re not expanding their business. So, yes, that has impacted the number of requests that we get to look at, simply because most of the customers are not in high-growth mode.”

Yet a closer look at the SBA’s third-quarter numbers shows some positive trends. Veteran lending jumped almost 70 percent. Rural lending dollar totals were up 93 percent. And loans for start-ups increased 147 percent.

“When the angels cry, sometimes they also sing,” Blaney says.

The upshot for small-business owners is that if they need money and can meet certain requirements, financial help is available.

“Here at Alliance Bank, we look at these type of slowdowns, if you will, as an opportunity to help people get a loan to expand and grow with them,” Burton says. “We’re definitely still in the lending process.”

Thankfully, business owners have no better friend than the SBA. It provides resources for those starting new businesses or expanding existing ones. And it has programs for businesses in need of capital.

When it comes to the financial side, it’s important to be clear: The SBA is not a lender. Instead, it works with banks, credit unions or other entities that make and administer loans. The SBA backs up loans with guarantees, which can run as high as 75 percent to 85 percent depending on the amount borrowed and the type of loan.

“For us, it’s a critical program,” says Lori Stelling, vice president and SBA lending manager for National Bank of Arizona. “We can serve so many more customers by givingthem a loan with an SBA guarantee, because the loans that we do under SBA we would not be able to do conventionally. And there’s a number of reasons for that. If somebody doesn’t quite meet our conventional cash-flow requirements, under SBA we can give them a longer term than we can conventionally.”

“For lenders, I would say SBA is a critical part of what we do.”

The SBA has several different loan programs.

The most common is the 7(a) loan, which serves a range of business financing needs with a maximum amount of $2 million. Another is the SBAExpress program. It makes smaller loans available, but the SBA only offers a 50 percent guarantee. One of the newest is the Patriot Express Initiative, a program that helps veterans and others in the military community with funding and training. Established businesses in need of long-term financing for major fixed assets can turn to the 504 program.

Not all active SBA lenders participate in all programs. Some specialize in 7(a) loans; others offer SBAExpress loans as their primary product. They also have varying restrictions and minimum loan amounts. Many lenders refuse to offer loans for start-ups. Also, only certain active lenders are approved for certain programs, such as Patriot Express. And some are given special status. Especially active and expert lenders qualify for the Preferred Lenders Program, which equates to a quicker turnaround on SBA loan applications.

Visit the SBA’s Arizona District Web site at www.sba.gov/az to find a completelisting of statewide lenders.

The SBA loan process is not that complicated. Take your proposal to a lender and, according to Blaney, if the lender is unwilling to do a loan without an SBA guarantee, they will deal with the agency’s loan processing center.

“It’s as simple as that,” Blaney says. “You have to fill out a couple of more forms for us. I mean, it is the government, we do have a form or two. But it’s not an arduous process. And it has been severely streamlined over time.”

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Before taking that step, however, Arizona small-business owners may want to take advantage of two other SBA programs: SCORE and the Arizona Small Business Development Network. Their experts can assist with business plans and help you understand lender requirements.

John Alig, branch manager and a counselor for the East Valley SCORE chapter in Mesa, says this may mean passing out what a fellow counselor calls “reality cookies.”

“Sometimes that includes telling people things that they don’t want to hear,” Alig says.

He warns that business owners who lack a proper credit rating, collateral and capital do have one thing: a big problem.

www.sba.gov/az
www.alliancebankofarizona.com
www.nbarizona.com