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Banking on a Business Relationship

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posted 1/20/2012 in Community News

Northwest Bank is a 'Top 10' SBA lender that understands the stress of small businesses

BY KENT DARR
Senior Staff Writer

Here’s the way to establish a banking relationship.

Alan Anderson, a writer of telecommunications software, decided he wanted to get into the dry cleaning business about four years ago. More important, he wanted to own the business and have his sons operate it.

At the same time, Northwest Bank in West Des Moines decided it should alter its lending philosophy to include loans guaranteed by the U.S. Small Business Administration (SBA).

Anderson had shopped his business plan to local banks, looking for a lender that could provide the $1 million necessary to acquire two Crown Cleaner stores and open a third.

Northwest Bank was convincing its loan officers that it was serious about digging deeper into the small business market by providing SBA loans.

“In general, there has been an attitude at commercial banks that they were too much work. We ought to have the mindset that we want to help every credit-worthy customer,” said Northwest Bank President Don Nickerson.

At the time, Northwest Bank had one loan officer with experience in working with the SBA.

Nickerson said that in 2008, small businesses with solid net worth were having a difficult time obtaining loans.

Bank officials met with representatives from the SBA to learn the intricacies of its lending programs.

It also began an internal public relations campaign to recognize Northwest Bank lenders who wrote SBA loans and it wore out a “little shoe leather” to make sure the Greater Des Moines business community understood that it was in the game.

As a result, Northwest Bank’s SBA loans grew to $6.4 million in 2010 from $2.7 million in 2009. Last year, loan value dropped to $5.3 million because of weakness in the Greater Des Moines retail and service markets, Nickerson said. The bank is one of the state’s top 10 SBA lenders and last year it was named Community Lender of the Year.

Banks issuing SBA loans also have been helped by changes in lending programs. The SBA has increased limits on its main programs to $5 million and $5.5 million, eliminated fees and expanded the uses for the funds.

The SBA will guarantee up to 90 percent of a general business loan and it will back up to 85 percent of a defaulted loan.

Nickerson said it was important for the bank to be able to come through for its business customers during difficult financial times. The types of loans it can make under SBA programs run the gamut from operating lines of credit to loan restructurings to the purchase of a business.

He said that unemployed people often start small businesses, but do so from a position where they lack collateral to secure conventional loans.

“We have tried to stay dependable and consistent, especially when other banks are unable to refinance or stretch loans,” Nickerson said. “People need banks when times are tough. We don’t want to chase them out.”

Northwest’s loans break down this way: 63 percent are for $250,000 or less; 31 percent are $250,000 to $1 million; 6 percent are for more than $1 million. The bank has approved 90 percent of SBA loan applications.

Anderson, who bought the Crown Cleaner franchise, moved all of his business accounts to Northwest Bank after securing the loan to buy the business.

“Northwest really helped guide us through the SBA,” Anderson said. “There is just so much to that, and so many aspects that Northwest walked us through. There was no way we could have figured it out.

“They really understand the stresses that small business owners are under.”