Wells Fargo has a plan to regain its momentum in Small Business Administration lending.
Though it remains the nation's second-biggest 7(a) lender, the San Francisco company's originations fell by 60% between the 2016 fiscal year, when it flirted with $2 billion in volume, and $786 million in production for the 2019 fiscal year.
The slippage comes at a time when more banks are participating in the 7(a) program, which enjoyed near-record volume in two of the past three fiscal years.
Wells is determined to right the ship by relying more on technology, said Chris Ledesma, senior vice president of strategic planning for the company’s SBA lending group. Ledesma said a new online system, set to launch next summer, will create a “one-stop shop” that allows borrowers to upload documents, complete forms and track the progress of an application.
“From application to signing and closing, our new digital experience will streamline the SBA loan process," Ledesma said. “We see [technology] as a huge lever for us. It’s a very important initiative.”
A summer release means the portal's impact will not be fully reflected in the 2020 fiscal year, which ends Sept. 30. Still, given Wells' size and capacity, the effort is one that competitors should monitor, said Scott Siefers, an analyst at Sandler O’Neill.
Wells "is substantial enough an institution to be able to make a really significant technological and digital investment,” Siefers said. “Whether that improves underwriting and speeds up turnaround, things of that nature, a company like Wells is in a good position to capitalize on those types of opportunities.”
The SBA upgrade presents more evidence that Wells is looking to move beyond the 2016 fake-accounts scandal that led to multiple high-level management changes and
“Far-flung operations were impacted" by the scandal, Siefers said. "While it’s unfortunate, you're seeing managers try to contend with that challenge and rise to it."
With $1.9 trillion in assets and an SBA portfolio in excess of $10 billion, the company remains a formidable competitor in areas like small-business lending, industry experts said.
Wells’ technology plans don’t amount to an overhaul of its SBA business operation, Ledesma said. Indeed, there are no plans to alter a universal service model that aims to serve small businesses regardless of size or classification.
“Our strategy has remained the same for decades,” Ledesma said. “We're trying to serve the spectrum, large, small and in between. Maybe a small florist, maybe a manufacturer. We take the perspective that we need to serve all of them.”
The 7(a) program, meanwhile, has gotten off to a solid start in the 2020 fiscal year. Through the first week of December, volume is on par with a year earlier, at $4.1 billion. Volume in the 504 program, which focuses on real estate and heavy equipment loans, is up 27% from a year earlier, to $1.3 billion.
Some lenders are forecasting higher numbers for the current fiscal year.
Holtmeyer & Monson, a leading SBA servicer based in Memphis, Tenn., is on pace to increase its business by 20% from the 2019 fiscal year, said G. Arne Monson, the firm's co-founder and president.
Wells Fargo, for its part, is committed to both the 7(a) and 504 programs, Ledesma said.
“We’re laser focused on taking this model, which has been hugely successful the past decade, and figuring out how we can make it better,” he said.
