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Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank

The 2013 Interagency Minority Depository Institution and CDFI Bank Conference

 

Roundtables
Collaboration on Small Business Growth, International Trade and Small Business Lending

Panel Moderator
H. Robert Tillman Assistant Director, Federal Reserve Bank of Philadelphia
Panelists
Grady Hedgespeth Director of Financial Assistance, Small Business Administration
Tony James Senior Vice President, ICBA Securities, Memphis, TN
Charles Tansey  Senior Vice President, Small Business, US Export-Import Bank
Jason Tepperman Director, U.S. Treasury Small Business Lending Fund
Whitney White CEO, Global Institute for Strategic Investment

 

Overview

Roundtable participants joined in the discussion with CEOs, government agency officials, and others on how to leverage programs to spur small business growth, job development, and small business lending in their communities.Programs include credit insurance, payment processing, loan guarantees, direct funding, guaranteed loan sales and technical assistance.  The officials discussed how to access these programs and make them work for a Minority or CDFI bank.

General Discussion

There has been a shortage of community banks, including MDIs, willing to enter the export lending business.  Immigration trends have created growth opportunities for local businesses located in underserved communities.  The need is for financing export of these small business products to growing markets overseas.  Most larger banks generally appear to be unwilling to make loans under $500,000 so this is an opportunity for MDIs and CDFIs to fill the void.

The Small Business Administration (SBA) has undertaken an initiative to focus their capital access and small business development services to increase the success of small businesses located in underserved markets.  A number of small dollar loan programs are available, providing flexibility for both small businesses and community banks (see pp. 17-19 for a description of these programs).  The burgeoning secondary market for SBA products also provides an opportunity for MDIs and CDFIs.  SBA provides resources for banks that are interested in setting up an SBA department or participating in the Preferred Lender Program.1

Many MDIs are located in states that also lead the nation in exporting.  MDIs and CDFIs have additional tools to support the growth of exports from small businesses in underserved markets through the U.S. Export-Import Bank.  Mission oriented banks have an advantage in their relationships with these small businesses, and the Export-Import Bank is seeking to partner with MDIs and CDFIs to boost export financing for small businesses.  They are developing a package where banks can make a profit on trade finance for small businesses (see pp. 20-21 for more information on this program).  Approximately 85 percent of Export-Import Bank deals are completed with small businesses as defined by the SBA.

Conclusion

A wide variety of tools and support are available to assist MDIs and CDFIs that have small business customers with products and services to export to expanding overseas markets.  Demographic and immigration trends point to additional growth and business opportunities in the future.



1 The SBA’s Preferred Lender Program streamlines the procedures necessary to provide financial assistance to the small business community.  Under this program, SBA delegates the final credit decision and most servicing and liquidation authority and responsibility to carefully selected PLP lenders.  SBA, however, will continue to check loan eligibility criteria.

Lenders are considered for PLP status based on their record with SBA, and must have demonstrated a proficiency in processing and servicing SBA-guaranteed loans.  In the event of payment default by the borrower and the need for enforced collections, the PLP lender agrees to liquidate all business assets before asking SBA to honor its guaranty.  Additional information is located at http://www.sba.gov/content/preferred-lenders-program-plp.

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