Bob Coleman of Coleman Publishing included my undercover videos the other day in his SBA Lending News section of ColemanPublishing.com. Another lender spoke up and sent Bob a response to my video clips. I’ve posted it (unedited) for you to read below, plus my response. I think you’ll enjoy this . . .
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Comment Submitted to Coleman 8/6/09:
To Coleman Publishing,
Once again, your coverage of Chris Hurn’s, of Mercantile Capital Corporation comments have indicted the 7a lending industry while simultaneously propping Chris’ own mortgage brokerage company. I don’t beleive unannounced visits to a bank retail personnel is an accurate portrayal of the SBA 7a industry.
To shed light on this shameless promotion of a mortgage broker, please offer some perspective on Chris and his company as the prior articles you covered have offended many of your clients. Specifically, let me point out the following:
1) Mercantile Capital Corporation (MCC) is a licensed mortgage broker and they are neither a lender nor a bank; they just pass themselves off as a lender. MCC solely promotes 504 loans. They arrange financing through a wholesale lender who pays MCC a premium. The higher the spread, fees, or pre-payment penalty, the higher MCC gets compensated.
2) Chris Hurn cut his teeth in lending making SBA 7a loans and had to compete against the 504 loan product. Since his prior firms did not offer the 504 loan, he had to sell his clients on the benefits of SBA 7a loans and he did this quite well. One can only speculate why all those loans he made to his prior cleints are now considered the wrong product for the client.
3) Chris states his firm can handle a lot of franchise lending and other needs for businesses, but his brokerage company is not in a position to do so. Owner-occupied real estate loans are still getting done fairly easily. The real need, and the real shortfall, is in what businesses need most: working capital, equipment financing, acquisition financing, etc.
I will hope you post my article so the industry can have an open debate on the person and the firm who is indicting the SBA 7a industry to promote their own brokerage firm. I can’t list my name as I am one of those “Zombie” bankers Chris refers to in his interview.
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My response, also featured at ColemanPublishing.com:
I’m not sure how my marketing necessarily “indicts” the whole 7(a) lending industry, especially when in these videos, I only mentioned once that the bankers lumped 7(a)’s in with 504′s, but there clearly are some inaccuracies in the anonymous commentator’s statements:
We are a licensed mortgage lender, not a licensed mortgage broker — as are, incidentally, all banks in Florida where we’re based. There is a substantial difference between a broker and a lender. Even our trade association, NADCO, recognizes what we’ve done for the industry and has honored us by naming us the “Banker of the Year” a couple years ago.
We attempted to become a national bank earlier this year, and we did receive approval from the OCC, but the FDIC was apparently too busy shutting down banks to realize that fresh bank capital would be a welcome addition to the marketplace. We actually portfolio some of our loans, rather than sell “everything” off to the secondary markets… something that happens with upwards of 40% of all SBA loans. Maybe the anonymous criticizer hasn’t been in SBA lending long enough to know that.
I “cut my teeth” making both 7(a) and 504 loans — my prior firm did both, not only 7(a) loans as the anonymous commentator states. I’ve only ever said that 7(a) loans are the “wrong loans” when commercial property is involved — and I’ve been relentless as one of the lone voices out there for years advocating for the interests of small business owners who routinely get taken advantage of by their bankers looking out only for their own interests above those of their borrowers — these videos demonstrated that.
I think 7(a) loans are a wonderful loan product for business acquisitions, working capital, and other start-up needs. And yes, I have made many 7(a) loans over the years, so much so that I know the industry wouldn’t have had the funding problems it has had over the years if all SBA loans involving commercial real estate were done with 504′s.
Bankers want to keep commercial real estate financing available in the 7(a) loan program because it lessens their collateral risk and makes for larger loans — makes sense for them. Despite this, floating rate 7(a) loans are a worse deal for most borrowers than below-market, fixed-rate 504′s where commercial property financing is concerned. If the SBA hadn’t outlawed bastardized 504′s (“piggy-backs”) a few years ago, bankers would love to be promoting those also at the expense of the 504 industry.
Bankers use 504 loans, predominately, as a convenience for them on larger, small business loans… consideration is rarely ever given to what’s a better deal for their borrower, despite bank ad slogans that say otherwise. This is why I’ve often said a “love-hate relationship” exists between the CDC community and the small business banking community. Sadly, CDC’s tend to be order-takers from bankers and only get used when the banker needs them… not when the borrower should be getting the best overall deal.
I am actually a minority investor in a commercial property where we examined all financing vehicles available at the time (conventional, 7(a), life insurance financing, 504′s), yet we selected a 504 loan because it provided the highest cash-on-cash return of all loan options. I can only imagine there are less than a handful of bankers that believe enough in and/or are entrepreneurial enough to use their own loan products.
So unlike the unnamed criticizer, I’ve “walked a mile in my borrowers’ shoes” and these videos just continue to show that. Perhaps more bankers should mystery shop their own banks to get a better sense of why the stereotypes about bankers exist in the small business community — that would prove enlightening.
Actually, my lending company IS in a position to fund 504 loans and has continued to do so throughout this year. We’ve been very active, yet many others have chosen not to be… maybe even the commentator’s admitted “zombie bank.”
I do not disagree that some small businesses need working capital right now, and to that end, we are investigating getting into the 7(a) marketplace as well. Be careful of wanting an “open debate” about this… you may just get it sooner than you think. It takes big shoulders to do what I did; it’s far easier to hide behind anonymity.
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What do you think about all this?
Leave a comment below to voice your thoughts about what you’ve read above. And also tell anyone else you know who would be interested in this back-and-forth about the state of small business lending in America.
David Baker says:
I guess I don’t understand why someone would admit to being one of the “zombie” banks in an effort to clear the likenesses that they have with what was revealed in the videos?
I am a mortgage broker, and I use banks and investor groups to obtain the best financing optinos for my customers. Period.
If MCC is a broker – great. If they are a bank great. The point is that they are making things happen, and if they are brokering out loans (as I do) they obviously have partnered with the banks and investors that are freeing up cash flow. The “zombie” banks clearly are not – and I’ve seen it nationwide at this point.
While the banks try to continually “level” the playing field and get rid of their competition (MCC and brokers in general) they don’t see where that is going to put them in the end. If you shut out the brokers and all that is left is the retail banker – you are going to have Uncle Sam up in all of your business, all the time.
Consumer choice is what matters most, and being the choice is the hardest part. Making things happen and stirring the pot once in awhile is a good way to get people to take notice. Good work, Chris.
Lisa Chapman says:
Your undercover story is right on the money. We have a residential construction company and can not get any help any where. I would love for someone to do a cover on residential. We are currently looking for private investors for a bond program. If you have any contacts please let us know. Thank you for your time and efforts.
Jack Smith says:
Nice Job..You have hit the nail on the head as far as the needs regarding 7a’s and 504 loans.
Supporting MCC says:
Mr. Anonymous should think about spending more time on his own creative promotion instead of spending his time criticizing Chris for his brilliant display of what truly is going on out there. These videos were only broadcasting the truth of what is actually happening out there. It’s unfortunate that Mr. Anonymous can’t see that Chris was trying to prove something much more broad than just trying to promote himself and his company. What I took from it was the EXACT thoughts that flow through my head DAILY. We are going to go down in flames if we don’t start paying attention to who we are hiring in these banks and start teaching them the products they have to offer their clients. It’s a major problem we face as a nation. These banks are laying off the educated employees they have in their branched so that they can hire someone else who will accept a lessor salary because they are desperate for a job. It’s a BIG MISTAKE. It’s what got us all here in the first place. Loan officers were pulled off the streets to sell people loans for their most expensive and precious assets and they were not educated enought to help these people make an informed decision on what they were doing. These bankers he visited CLEARLY displayed the unforunate set of circumstances we face by not knowing a thing about what they were selling! Mr. Anonymous you need to take a look at the bigger picture instead of just jumping to a conclusion and commenting with such ignorance. I thought it was great. I am launching a new product for my clients next week along with an incredible new website that will educate people like Mr. Anonymous on what is going on out there and how we can fix it. I will most DEFINITELY be including videos such as the ones Chris put out there for us.
Braudis Lee Pegram says:
Since when does a visit to a retail bank need to be “announced”? You didn’t ask to speak to the CEO or the President. And if in fact the commentator is one of those “Zombie” banks, then that would explain the many inaccuracies in the statements. I was inclined to say “his” statements. But he may have been a her. Ah, the problems of anonymity.
MY only bone to pick with you is that one of your LOs told me today you still don’t lend in Michigan. I have a 450k loan that’s perfect for 504. This may be an opportunity for Mercantile Capital to reconsider. Anyway, I like your business posture; and as Yoda might say, “…stand up guy you are.” Keep up the good work!
Russell Davis says:
Hi Chris,
I have encountered the exact same reaction from many local banks. I don’t mind telling any of them what I think about their greed and very bad habits that cost the small business owner a ton of money and lost equity.
If I can help you any way in your endeavor I would be glad to do so.
Russell Davis, President
Southern Commercial Corp
Les Gay says:
Chris:
It seems you have more knowledge of your business and the BANK business than the banker. You prove my opinion the bankers understand less about their product than any other industry.
Keep up the good work.
Les Gay
David Smith says:
I truly enjoyed the video, at first I thought you were in my local banks. The fools around here couldn’t explain the Arc loan either, thinking it about a big boat with animals on it.
Will Crooks says:
This “Mr. Anonymous” talks about an open debate, but his post holds a tone closer to a personal attack. Its hard to respect any points made by someone who has to resort to that kind of action just to get attention.
Good job setting the record straight Chris !
Chuck Siple says:
Chris,
Keep up the good work. Integrity, concern for the best interests of the customer and a good product should always win out over incompetence and apathy.
I say ‘should always’ because these days I have this nervous tic concerning our government. It seems that they don’t value the independent, successful, small business entrepreneur. These are the people that can’t control with their bailout largesse mentality and this threatens their authority. A stroke of the pen can dramatically alter any program regardless of it’s worth (504, 7a, etc.).
Good luck.
Pete Papa says:
Chris – Well Done!
It is interesting to note that the anonymous commentator decided to attack you as opposed to defending what was actually said about the ‘zombie’ bankers like him/her. You must be hitting a nerve otherwise the anoymous ‘zombie’ banker would have defended him/herself rather that attack you!
Greg Sausaman says:
I got a kick out of the 4 video clips. Any chain is judged by the weakest links. There seem to be many of those out there.
Chris, I applaud you for being straight forward. The lending climate for the small business person is very limited. Traditional banks just don’t seem interested, so alternatives are necessary.
History says that those with a great product, a competent organization to deliver that product, and a work ethic that chooses to do what it takes to succeed are the benchmarks for greatness. That seems to be what Chris and his team provide. Good for you. Keep up the good work, and count us in.
Big Papa says:
Dear Anonymous,
It appears that Chris’ video touched a sensitive spot with you. One thing for sure, the taping was not scripted. So the conclusion is: the persons questioned did not have a clue about the products being inquired about. Your concern should have been centered on the fact that the financial instutions employee’s were not well trained about their respective loan products. Instead youfocused on the fee income Chris was able to earn / negotiate by providing the best loan product for his clients. Could it have been that Chris out negtiated your bank and you are still seething from losing another deal to Mercantile Capital Corporation? Anonymous, I would not want anyone to know who i was either. A knowledgable employee is the best defense in a competative environment. Good job Chris!
Jim Larsen says:
I applaud all your marketing efforts and outreach to the commercial lending community