SBA lenders in San Francisco North Bay recount difficult year helping employers survive

NORTH BAY BUSINESS JOURNAL

May 6, 2021

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The Business Journal asked these seven lenders who work with North Bay firms on securing U.S. Small Business Administration funding about the struggles local employers have been facing with coronavirus pandemic restrictions in the past 14 months and navigating the sometimes challenging application process for billions in federal relief.

Jeff Clark

Senior Lender

Live Oak Bank

100 B St., Suite 100, Santa Rosa 95401

707-921-1102

jeff.clark@liveoak.bank

Years worked in the banking business: 25 years

Years at your present position: 6 years

Tell us about yourself: I have worked with wineries, breweries, distilleries and craft beverage producers throughout the United States. My experience spans the spectrum from small family operated businesses to publicly traded companies.

Significant news at your company in the past year: In spite of the conditions, we survived and prospered.  What a year!

What has been the direct impact of the coronavirus on your level of activity?

It impacted us in several ways.  Providing PPP (Payroll Protection Program) loans occupied several months of our time taking us away from loan production.

It also impacted our borrowers with on-premise exposure, shutting many of them down for months.  We usually travel several months out of the year for site visits, trade shows, etc. and that didn’t happen.

Tell us in what ways the SBA program of aiding those have received SBA loans has been modified to lend to small business and in what ways has it had to adapt programs for those with existing SBA loans?

In addition to the PPP and EIDL (economic injury disaster loan) programs the SBA provided payment deferrals, payment subsidies and waived the guarantee fee.

In two years, and presuming the COVID pandemic has substantially abated, what will the SBA lending market be like?  Will it have returned to what it was pre-pandemic or will it be different and why?

None of us have been in this situation before so it is really hard to say.  Business will always need capital to grow though.  There could be pent up demand that drives higher than normal levels of loan volume.

As far as untapped resources for business just starting, which is the one that most borrowers don’t know about but should and why?

Small Business Development Centers are an SBA funded resource that can assist with business plans, financial projections and advice.

Brian Kilkenny

Business Services Administrator

Redwood Credit Union

3033 Cleveland Ave., Santa Rosa 95403

707-576-5422

BKilkenny@redwoodcu.org

Years worked in the banking business: 10

Years at your present position: 2

Bio: As credit administrator at Redwood Credit Union (RCU), Brian Kilkenny is responsible for the growth, quality, and retention of RCU’s business loan portfolio.

Prior to joining RCU, Kilkenny spent more than six years with Exchange Bank. He holds a bachelor’s degree in agricultural business management from Oregon State University and began his banking career at Bank of America.

Significant news at your company in the past year: From 2020 to 2021, RCU grew by $1.7 billion in assets. We had planned well for the unexpected and that kept us strong and able to support Members, team members, and the community when they needed us.

No one knew exactly what to expect in business lending, but one year in, we’re optimistic with the performance of our business portfolio. The resilience of our local small businesses was evident as we watched them alter and modify their approach and delivery to customers, to meet customers where they are.

Despite the odds, many of them have stayed solvent, kept the doors open, and continued to pay employees. RCU is proud to have supported that effort by maintaining close partnerships with our business members and borrowers.

What has been the direct impact of the coronavirus on your level of activity?

We’ve been pleasantly surprised to see a strong pipeline of growth and loan opportunities in 2020 and into 2021. We’ve watched businesses grow, borrow, and invest in themselves, which is a positive sign and sets them up well for future success.

This high demand for conventional business, coupled with two rounds of the SBA’s Payment Protection Program (PPP), has meant a lot of activity for the credit union.

Tell us in what ways the SBA program of aiding those who have received SBA loans has been modified to lend to small business and in what ways has it had to adapt programs for those with existing SBA loans?

The SBA has been offering economic injury disaster loans (EIDL) for years, and those came into play recently to help local businesses.

But COVID spurred the SBA to open a Restaurant Revitalization Fund to provide restaurants with funding equal to their pandemic-related revenue loss, and they offered a Shuttered Venue Operators Grant (SVOG) to aid hard-hit small businesses, nonprofits, and venues.

In addition to that, they provided two rounds of PPP loans, which were administered by financial institutions. Because the SBA made payments for borrowers, bringing them current with their loans, RCU and other financial institutions had the flexibility to offer additional assistance.

We’ve continued to see strong traditional SBA loan demand throughout the pandemic, outside of PPP and Covid-related loans.

We believe we’ll continue to see strong SBA demand—maybe even stronger than before—because more people than ever are aware of the SBA and its function within our world of lending.

We’ve also seen more financial institutions learn about and enter into the SBA program because of increased attention over the last year.

This is a great thing for the small business world. RCU has always been a strong proponent of the SBA program and we’re happy to see more financial institutions enter in and offer various SBA loan products.

As far as untapped resources for business just starting, which is the one that most borrowers don’t know about but should and why?

Many borrowers don’t understand the power of establishing a relationship with their financial institutions and lenders. We’d like borrowers to know we’re here and ready to begin a partnership that stands the test of time.

Starting a business on a strong foundation can be one of the most important aspects of a long and successful journey, and RCU can be a real asset on that path.

Brandy Lee Seppi

Executive vice president and chief lending officer

Summit State Bank

500 Bicentennial Way, Santa Rosa 95403

www.summitstatebank.com

707-568-4900

bseppi@summitstatebank.com

Years worked in the banking business: 27 years

Years at your present position: 4.5 years

Tell us about yourself: I love what I do!  Every day, I work to find solutions to help independently owned businesses grow – which in turn creates more local jobs and improves the lives of people in our community.

I also grew up in Healdsburg – so I feel very fortunate to be able to support the Sonoma County community where I was raised, and where I am now raising my own family.

I also grew up in a bi-racial family, which although so much more common now, was so rare back then!  My mother is Hispanic from Spain, and my father is Chinese and Japanese, from Hawaii.  The mix of cultures in my own household helped me cultivate a lifelong appreciation of, and respect for, differences – whether that be in the form of physical characteristics, cultural norms or personal opinions.

Significant news at your company in the past year: There were many things accomplished last year at Summit State Bank but the three that come to mind are our participation in PPP, CEO transition and the fact that Summit stayed open for business when others pulled back or out, due to the uncertainties of COVID-19.

When Sonoma County shuttered last March, Summit’s entire lending team dove-in and helped save local jobs by funding over 600 PPP loans, totaling nearly $97 million.  Helping our community with PPP loans, although exhausting at times, was emotionally rewarding and helped the team get through the darkest parts of shelter in place as we had a clear, motivating purpose: To put service above self and assist our customers get through the many challenges of COVID-19.

Additionally, in the midst of shelter in place restrictions, our then CEO, Jim Brush, transitioned to the chairman of the board and Brian Reed, our then chief credit officer, transitioned to CEO.

Given the internal nature of the transition, it eliminated the potential negative effects on moral and kept our ship sailing in the right direction.

Given this seamless transition, we were also able to make timely and sound business decisions to remain open for lending as businesses looked to expand or buy property during the pandemic, which resulted in a net loan growth, outside of PPP, for FYE 2020 of over 17%.

What has been the direct impact of the coronavirus on your level of activity?

Shelter in place was such a shock to the system, but the team quickly adjusted to work from home and we were able to be very productive.  In person deal huddles turned into video chats and we figured out alternative ways to be effective.

It elevated the need for attention to detail and direct, timely communication with customers and each other to propel things forward.  I’ve always been a proponent of flexibility in the workplace, and shelter in place proved that you don’t need to be in the office to get stuff done.

The U.S. Small Business Association (SBA) has been very supportive for our small business community with new programs to support companies weather the effects of the pandemic on their business.

New COVID relief options that go directly through the SBA include the Economic Injury Disaster Loans (EIDL), Shuttered Venues Grant and Restaurant Revitalization Fund.

Additionally, for new and existing SBA clients, the SBA has introduced several payment relief initiatives which in some cases supports monthly loan payment forgiveness for up to six months.

SBA continues to re-position its loan programs to match the needs of small business clients irrespective of the economic cycle.  We would expect that culture of innovation to continue into the future and we are excited to continue to be a responsive partner in order to ensure the small business owners in our community receive the equity they need to grow their businesses.

As far as untapped resources for business just starting, which is the one that most borrowers don’t know about but should and why?

There are two that come to mind. SCORE has four offices in the North Bay and is a support organization for small businesses.

Services include mentoring, online training, an online resource library and local events for businesses just starting and also for those already established.  I would also mention Hello Alice, started by Carolyn Rodz and Sonoma County’s Elizabeth Gore, that specifically supports women, minority, immigrant and veteran business owners by using technology to match people with opportunities for education and funding opportunities, online or in their local area, to support them as they start and grow a business.

Dan Ryan

Executive vice president and chief lending officer

Poppy Bank

438 First St., Santa Rosa

707-636-9000

dryan@poppy.bank

Years worked in the banking business: 22

Years at your present position: 1

Tell us about yourself: I’ve been in banking for over twenty years and held positions in various areas including finance/accounting, risk management, internal audit, and credit administration. I was hired as the chief credit officer at Poppy in 2018 and following the retirement of Tony Ghisla, I stepped into the chief lending officer role.

Significant news at your company in the past year: 2020 was an interesting year for obvious reasons, but despite the challenges posed by the pandemic, Poppy Bank grew 27% and ended the year with over $3.2 billion in total assets.

We opened branches in La Jolla and San Rafael and relocated to a new location in Roseville giving both our branch office and SBA Administration group significant space for expansion.

In the 1st quarter of 2021, we also opened our Napa branch, which was met with quite a bit of enthusiasm in the community.

Poppy participated in the Paycheck Protection Program and has originated over $150 million in PPP loans to both existing and new customers to date.

We also made it a point to contact each and every borrower on multiple occasions to assess their needs and get a better sense of how they were handling the challenges brought about by the pandemic.

In addition to growing assets, Poppy also raised $100 million in capital in the form of subordinated debt to ensure that we are positioned for continued growth well into the future.

What has been the direct impact of the coronavirus on your level of activity?

The most direct impact was certainly on providing assistance to our existing borrowers to the extent possible. We were proactive in offering modifications to grant relief to borrowers when needed in an effort to preserve cash flow, and it seems to have paid off as borrowers have recovered and resumed scheduled payments, even as various markets continue to phase in reopening.

In addition to loan modifications, we have also coordinated CARES Act payments for 7(a) borrowers and participated in the PPP program, as previously mentioned.

While demand for loans was down in the 2nd quarter and into the 3rd, it seemed to ramp up through the end of 2020, and 2021 has seen a significant increase as optimism continues to improve.

The reaction of banking regulatory agencies early in the pandemic was swift and effective.

Even very early when the extent and duration of the economic impact was largely unknown, the collective recommendation was to work with borrowers and provide assistance wherever possible, which we made a point to do. SBA borrowers typically have less outside net worth and cash reserves, so the payment assistance for 7(a) and 504 borrowers via the CARES Act was considerable.

When reviewing prospective borrowers, the financial analysis of 2020 performance requires much more nuance as the extent of the impact of the impact of the pandemic cannot be quickly ascertained, nor can their ability to recover to pre-pandemic performance levels.

The SBA program has historically been a great vehicle for borrowers following an economic downturn, and I would expect both 7(a) and 504 lending to be at high levels for 2021 and 2022.

There is a great degree of optimism in the market as well as pent up demand, and business owners want to take advantage of that combination.

As far as untapped resources for business just starting, which is the one that most borrowers don’t know about but should and why?

I think the most significant untapped resource is your community banker. We want to be seen as a trusted advisor and can often help by offering and explaining the deposit or loan product that best fits a business owner’s needs.

It is said that a small business owner needs an attorney, a CPA and a banker that he or she can trust, and the earlier they can discuss and understand the business, the more helpful they can be.

Bob Thompson

Vice President

Bay Area Development Company

1801 Oakland Blvd., Suite 100, Walnut Creek 94596

925-472-5603

bob@baydevco.com

Years worked in the banking business: 36 years

Years at your present position: 25 years

Tell us about yourself: I’ve been in the SBA lending business since 1985, having first started as an underwriter processing SBA 7(a) loans.

I then transitioned into training and development, helping to open up new production offices in both Southern California and Texas.

In 1995, I joined Bay Area Development in my current position as a lending officer and truly enjoy the opportunity to assist small businesses obtain SBA 504 financing to help secure long term locations from  which to operate their businesses. My interests include sports of all kinds, primarily as a spectator these day, golfing, music, comedy and gardening.

Significant news at your company in the past year: The most recent significant news is the hiring of an underwriter to supplement our existing staff. With interest rates at all time lows, the demand for SBA 504 loans has been at or close to all time highs.

The hiring of an additional, highly experienced underwriter has already largely alleviated our processing bottleneck and we are primed for additional, increased lending activity.

What has been the direct impact of the coronavirus on your level of activity?

COVID-19 has had a varied impact on specific industries, often negative but also often positive or at least neutral. Those industries not negatively impacted, and the companies that operate within them, have been active and eager to take advantage of the low interest rate environment we are currently experiencing.

Our lending activity is up over 40% due to a combination of these low interest rates and tightening conventional credit.

New loan applicants whose loan guarantee applications are approved prior to the end of SBA’s current fiscal year end (Sept. 30) will receive both fee relief (Federal Government to pay both the CDC processing fee and the 1st mortgage lender “Participation Fee”) and payment relief (initial three months of payments on the SBA guaranteed second mortgage loan).

Existing borrowers received significant payment relief (as much as six months in the first round) and then an additional two months in round 2, with certain highly impacted industries such as restaurants, health clubs, salons and hotels, receiving additional three month of round 2 payment relief.

This payment relief has been a significant benefit to those small businesses with SBA guaranteed loans.

While I expect most would hope that the impacts of COVID-19 would be largely temporary, it will, no doubt, have some permanent impact on how many businesses conduct operations, with many more people working remotely at least on a part time basis.

Ultimately, I expect the SBA 504 lending market will remain strong but will be tempered by a gradual and continued rise in interest rates.

As far as untapped resources for business just starting, which is the one that most borrowers don’t know about but should and why?

Small Business Development Centers, or SBDCs. These entities provide all sorts of resources from business plan development, projection assistance and even with patent applications. There are six in California with one each in Santa Rosa and Napa.

From the SBA’s website. The SBDC Program is designed to deliver up-to-date counseling, training and technical assistance in all aspects of small business management. SBDC services include, but are not limited to, assisting small businesses with financial, marketing, production, organization, engineering and technical problems and feasibility studies.

Special SBDC programs and economic development activities include international trade assistance, technical assistance, procurement assistance, venture capital formation and rural development.

The SBDCs also make special efforts to reach minority members of socially and economically disadvantaged groups, veterans, women and the disabled. Assistance is provided to both current or potential small business owners. They also provide assistance to small businesses applying for Small Business Innovation and Research (SBIR) grants from federal agencies.

Brian Wilken

SBA Business Development Officer

Wells Fargo Bank

200 B Street, Santa Rosa 95401

628-217-1629

Brian.J.Wilken@wellsfargo.com

Years worked in the banking business: 14

Years at your present position: 3.5

Tell us about yourself: As an SBA banker, I have always enjoyed the opportunity to be a small part of a business owner’s story.

I love hearing from the source how the business came to be, diving in and understanding the flow of money and operations of the company.

I can feel the passion from the business owner and understand the work and focus it takes to make a small business successful so they can serve the community. There is something admirable about a person who, at one point, went all in on their dream.

I started my career as a loan underwriter before transitioning to a client-facing sales professional, which helps me offer a unique perspective when it comes to helping my clients through the SBA loan process. Whether working as a strategic consultant discussing ways to grow or merely carrying out what my clients need from their lending partner, I wake up just about every day excited to get to work and I feel incredibly grateful for that.

Significant news at your company in the past year: At Wells Fargo we have definitely remained open for business. We have maintained close connection with our clients throughout the past year, recognizing the importance of our role during a critical time.

Recognizing the need for more digital capability, Wells Fargo SBA Lending launched its new Lending Management platform to bring automation, transparency and speed to our customer experience throughout the SBA lending process.

In 2020, Wells Fargo launched the Open for Business Fund, a roughly $420 million small business recovery effort created to help entrepreneurs stay open and maintain local jobs.

Through this initiative, Wells Fargo is engaging Community Development Financial Institutions and nonprofits across the U.S. to provide women and diverse entrepreneurs with increased access to capital, technical expertise and long-term resiliency programs as part of fostering an inclusive recovery.

Already, the Open for Business Fund is helping a projected 22,000 minority-owned small businesses keep an estimated 66,000 jobs nationwide.

What has been the direct impact of the coronavirus on your level of activity?

When COVID broke out in the United States in March 2020, a lot of business owners hit the pause button on what they had in process with us.

Once the initial shock of the pandemic wore off - sheltering in place and other restrictions - many of our clients resumed their projects and we had a few who decided not to proceed.

Pricing for SBA loans dropped and we quickly got very busy again helping our clients take advantage of a historically low rate environment while simultaneously assisting them with PPP loans and other benefits like Section 1112 of the CARES Act, which offered existing and new borrowers a payment subsidy.

In 2021, the continued benefits of the Section 1112 subsidy payments were announced, driving an increase in activity. With rates edging up as the pandemic’s outlook improves, we have seen business owners evolve and make adjustments. Business owners in our community have proven themselves adaptable and resilient, quickly learning to do things differently in this new environment.

Give us your opinion on ways the SBA’s first program to aid small businesses in the pandemic and the second version of the aid programs have changed, if at all, and in what ways from the bank’s perspective.

Wells Fargo has remained committed to helping as many small businesses as possible obtain funding through the Paycheck Protection Program.

We continue to support the efforts by the SBA to provide aid to struggling small businesses, including updates to the program that allowed businesses to obtain second draw loans and the expansion of eligible expenses and forgiveness criteria.

The second round of funding included a more focused approach on ensuring the smallest businesses received access to funds first.

For just about everyone I know, experience dealing with a pandemic doesn’t rank anywhere on the list of things we have experience in. COVID-19 has been unlike anything else in most of our lifetimes, and has had an enormous impact on small business in the United States.

While giving credence to that, and also recognizing that each industry’s impact has been different, we already feel that small business lending activity is returning to its pre-pandemic level. Aided by benefits from the government-funded programs offered through the stimulus legislation, like PPP and EIDL, businesses have learned to adapt and have created new business plans aimed at generating revenue in this new business environment.

There will always be ups and downs across different industries in good times and bad, but I think the pandemic also reinforced what the SBA program is all about.

A business owner’s ability to secure favorable terms offered by an SBA loan protects them to an extent and puts them in a better position to weather an economic downturn like what we experienced with COVID.

As far as untapped resources for business just starting, which is the one that most borrowers don’t know about but should and why?

Conversations with my customers often remind me that not everyone is aware of the full spectrum of SBA lending programs available to small business owners.

For example, at Wells Fargo we offer start-up loans for brand new businesses. We can finance leasehold improvements, inventory, working capital needs, and more. We can even finance commercial real estate for a start-up business. Sometimes the perception exists that an SBA loan is a last resort, but often times the best terms available for commercial financing are through the SBA loan program.

Paul Yeomans

Senior Vice President, Wholesale Banking Sales Manager

Exchange Bank

545 Fourth St., Santa Rosa 95401

707-524-3328

paul.yeomans@exchangebank.com

Years worked in the banking business: 30

Years at your present position: 3

Bio: Yeomans has over 30 years of experience in the banking and finance industry and oversees Exchange Bank’s Commercial Banking, Construction and Commercial Real Estate and Small Business Administration.

Significant news at your company in the past year: Exchange Bank completed a full technological upgrade of our IT delivery services over the past two years, including the conversion of our digital and mobile banking platform in 2019.

Our new technology allowed us to increase the electronic banking products that we offer to our customers, both consumers and businesses.

In May 2020, Exchange Bank’s president and CEO, Gary Hartwick, announced his retirement and named Chief Banking Officer Troy Sanderson as his successor, effective Jan. 1, 2021.

What has been the direct impact of the coronavirus on your level of activity?

Exchange Bank hit the ground running to provide financial lifelines to local businesses, charitable organizations and nonprofits through the Paycheck Protection Program (PPP).

In a matter of days, the Bank built an online-based application and funding system that enabled us to provide quick relief to hard-hit business customers, especially in the lodging, restaurant and tourism industries.

Exchange Bank accepted a huge number of PPP applications and mobilized virtually every department in the Bank to assist in getting them funded.

We were ultimately able to provide funding to 1,783 small businesses in the community with loan balances totaling approximately $264.4 million in 2020. Even more heartening is the fact that $22 million of those PPP loans were for local nonprofit and charitable organizations who provide critical, life-sustaining services to those in our community who are in most need.

As of April 20, 2021, we’ve funded an additional $119 million in PPP loans to 1,008 customers.

At the onset of the pandemic, there was an uptick in activity in the area of loan payment deferrals. SBA also offered to make six months of payments for all SBA borrowers on existing SBA loans that were current.

Borrowers were not required to reimburse SBA for these payments. In addition, the SBA Economic Injury Disaster Loans program (EIDL) program gives any small business effected by a disaster six months of operating expenses up to $2,000,000 in the form of a loan repayable over 30 years at a low fixed interest rate of 3.75%.

SBA is currently making the first three months’ worth of payments on any new SBA 7a loan approved between Feb. 1, 2021, and Sept. 30, 2021. Borrowers are eligible for three months of payments with a $9K cap as long as funds are available.

Exchange Bank has an experienced SBA group with local decision making – we work with our customers through every aspect of the loan process and can also offer all the necessary deposit and treasury management tools. Our full-service SBA group is ranked #1 in Sonoma county.

We are already seeing an increased demand for SBA lending as local counties move into less restrictive tiers.

The SBA programs have proven to be a strong partner for the business community throughout 2020 and into 2021. These programs provide the proper structure and funding for businesses looking to grow and expand as demand for their products and services increases.

We are seeing new optimism in 2021, with owners looking for buyers and industries beginning to rebound. Certain businesses are even pivoting and creating new niches—not because of specific economic issues but because of the effects the pandemic has had on their business and employees.

The shelter-in-place and safety precautions of 2020 literally shut down some businesses and limited access to others, but I believe we are moving back to a solid economy, and that the demand for SBA lending has and will continue to increase.

As far as untapped resources for business just starting, which is the one that most borrowers don’t know about but should and why?

The SCORE program is an untapped resource that every new business should know about. SCORE is a resource partner with the SBA.

The SBA administers a Congressional grant which provides SCORE with funding. SCORE volunteers work with the SBA to provide small business mentoring and training to entrepreneurs through SBA offices.

New and existing business owners can get professional advice on a variety of topics including finance, business strategy, sales, marketing and more.