Medallion Financial Corp., having found a small-business lending specialty, is proving its ability to get through heavy traffic.
The New York-based company finances taxicab licenses, which can run up to $203,000 for a license for one cab or $472,062 for a corporate medallion covering two or more cabs.
Medallion is one of those specialty small-business lenders that increasingly appear on the radar screens of banks as they look to new markets to sell small-business services.
The company's owners recently went to market in an initial public offering of 5.8 million shares for $11 each. The stock is now about $13 a share. It's Nasdaq symbol is TAXI.
Taxi medallion financing has expanded in the last decade, encouraging new competitors, such as Banponce Corp.'s Banco Popular de Puerto Rico, to enter the business.
Before 1990, individual medallion owners in New York City could lease their permits to other operators. Now the medallions must be resold to owner operators, increasing the need for financing.
Medallion, which has a much smaller sideline of financing dry cleaners and coin-operated laundries, has more than $150 million in total loans and $200 million in assets. It has recently expanded its medallion financing beyond New York to Chicago and Boston.
'Its a very personal business climate, which is not typical in a traditional banking company," said Michael Kowalsky, executive vice president of Medallion. "Our clients are visited on a regular basis."
Many lenders regard their business as financing the American dream of entrepreneurship. More than 85% percent of taxi medallion owners are immigrants.
"You work 14 or 15 hours a day but after it is paid up, you can afford to go on vacation," said Willie Bly, vice president of the League of Mutual Taxi Owners, which competes with Medallion. "A foreclosure is very rare, its a guy who gambles or is very lazy."
Taxi medallions are financed for up to 20 years with variable interest rates, or fixed rates ranging from slightly above prime to 1.25% above.
The New York Taxi and Limousine Commission is in the midst of auctioning 500 medallions. Medallion Financial issued letters of commitment to finance 50 of the 133 medallions up for auction in October.
Owners of the medallions can sell them individually and the financing agreements usually change hands every three and a half years.
Medallion also administers and services loans for larger financial institutions.
"The underwriting requires some considerable expertise," Mr. Kolwalsky said.
