The path to Small Business Administration (SBA) loans for First Security Bank’s Itzel Meador has been a long and winding road — and a promising career path, too.
The Dallas native came to Arkansas over 20 years ago for her husband’s job. They are located in Fordyce, a small town of less than 5,000 people and the county seat of Dallas County, in south-central, rural Arkansas. The two Dallases don’t have much in common.
Meador, a graduate of the University of Texas at Dallas, found short-term work for Little Rock-based Arkansas Capital Corp. as a loan assistant. She was quickly elevated to lender status and cut her teeth with a portfolio of SBA-backed loans.
Meador credits Sam Walls, the former longtime ACC executive, as a great role model for his early career.
“Sam Walls was by my side. He really showed me how to be customer-oriented, very good at listening to customers and trying to find ways and opportunities to solve a problem,” she said. got to see for myself how important problem solving really is in banking, especially when it comes to economic development, it helped me a lot to think outside the box and prepared me in this way.
After a 10-year career at ACC, Meador worked for two other banks in the SBA lending space prior to her current role as Director of SBA Lending at First Security Bank.
“We created something out of nothing, so it’s going to take some time to get us to where we need to be. In a very short time we have already seen a lot of momentum,” Meador said.
Searcy-based First Security Bank, which has operations throughout Arkansas and a significant market share in northwest Arkansas, was the largest bank in the state without a dedicated SBA division. The hiring of Meador in April 2021 changed that.
John Rutledge, regional president of First Security Bank, said the bank previously used third parties, such as Arkansas Capital Corp., to use SBA services. With Meador on board, he foresees much shorter lead times for SBA loans, but more importantly, new options to offer community bank customers.
“We’ve always said our customers can choose when they can do business with us and when they can’t. It’s always their time, not ours. This is another example of trying to force this decision on them, hopefully,” Rutledge said. “We hope that over time, with Itzel’s ability to help our communities, our bankers and our markets become more knowledgeable, comfortable and confident with SBA, and what exists and what is possible, that SBA will be an initial option for the customer.”
According to the federal agency, there are three major programs under SBA-backed loan funding, which grew 64% in 2021 to $208.9 million. Product lines include 7a, 504 and Microloan programs.
The most active program revolves around 7a loans, which provide government-backed loans to small businesses to increase liquidity for working capital and eliminate borrowing costs and other fees. The SBA said the program supported or created 3,834 jobs in Arkansas in the last fiscal year.
The 504 Loan Program provides long-term, fixed-rate financing of up to $5 million for businesses. It is primarily fixed asset related, and the borrower must show opportunities for business growth and job creation for a community.
The Microloan program offers loans up to $50,000, but many are smaller. The average loan was around $23,000 last year. Two huge targets for the Microloan program are small businesses and nonprofit daycares.
A total of 25 lending institutions in the state lend to the SBA, while 51 financial firms outside the state lend through the SBA. SBA loan take-up rates are much higher in underserved communities and businesses owned by women, veterans, or people of color.
Meador said she is currently working with a variety of companies ranging from medical practices and startups to franchise owners and corporate refinancing. She was surprised at how active the environment was.
“SBA does its best in tough markets when the economy is a bit tough. That’s when SBA flourishes and people really appreciate the programs,” she said.
One of his most memorable transactions involved a father who eventually wanted to transfer his business to a son. The company was ready for an acquisition to expand even further, and the rural nature of its location meant significant jobs for a small town in western Arkansas.
Although the owner could have put up all of his retirement savings as collateral for a conventional loan, it would have meant years of sleepless nights wondering if his investments were safe. Meador showed the owner, a savvy businessman with a background in finance, how an SBA-structured loan could reduce collateral and secure significant working capital. The deal worked perfectly.
“He said, ‘You’re the first person who told me I could do this for less. How is that possible?’
“I told him the SBA wanted you to have a backup. They don’t want you to use all your chips. You look at it through a conventional lens. I tell you this through an SBA lens because they want to promote economic development. When we finished, he said, “I should have called you much sooner.”
Meador pointed out that the “economic development” aspect of SBA loans is one of the main reasons the programs exist. The SBA wants to create and preserve jobs and offers longer term financing than conventional loans because of this mission.
“It was a very small community that needed this business. People don’t realize that buying a business means as much economic development as starting a business. Because if they leave, that’s the biggest provider of jobs, and that’s a big deal,” Meador said.
Rutledge said the SBA warranty is one of the benefits of adding it as an option for customers to consider. It may not be the best option, but it can be a good option. And ultimately, providing all the opportunities and letting customers decide what they can consider optimal is the goal.
“The great thing about SBA is that he can do a lot, but he can also do the little, mom and pop, one-off where they don’t have family to step in. He’s the store manager; he’s the sales manager. He’s someone who wouldn’t normally have the ability to buy something like this,” Rutledge said.
PANDEMIC “CONFIDENCE BOOSTER”
The SBA has been around since the Eisenhower administration, but the COVID-19 pandemic that broke out in 2020 was a breakthrough for bank usage nationwide. The SBA has been tasked with overseeing two aspects of pandemic financial relief: the Paycheck Protection Program (PPP) and Economic Disaster Loans (EIDL).
Rutledge said First Security Bank was considering launching an in-house SBA program ahead of the pandemic. Still, the lessons learned during the PPP were a “confidence booster” for starting your own SBA program.
At First Security, Rutledge and Meador said all options are on the table when a customer walks in. They are not automatically directed to a conventional loan or the SBA route. The goal is to find a solution that works.
“In our business, there is no greater feeling than knowing that you have helped a client. This is our great reward,” he said.
Meador said, “I never want to impose a program on someone if it’s not meant for them. It takes a commitment to switch to SBA, and there are pros and cons to switching to SBA. I like to let customers know “here are the positives, here are the negatives”.
“There are times when it’s only suitable for SBA because it’s a startup and they don’t have the capital. And that’s the only way to make it work. There are times, because we’re a community bank, we’re flexible. We can get conventional, and that’s okay,” she added.
Meador said she responds to calls and inquiries from seniors looking to sell businesses — business opportunities owned by women, veterans and minorities; young people looking to start something from scratch; and potential mergers or acquisitions as industries consolidate in the post-pandemic economy. Its pipeline is jam-packed at the moment, but it expects more activity over the next two to three years. It may be a generational shift, and it may be the effect of COVID on workers. Anyway, the phones are ringing.
“I really feel that in the next two to three years the economy is going to lead to a huge force of business acquisitions. I see a lot of people from the younger generation who are enterprising,” he said. she said, “And that’s going to keep me pretty busy.”