An Atlanta specialty finance firm is seeking partnerships with community banks so it can make more and larger loans to rural businesses. And to do so, B&I Lending is counting on the capital-and industry contacts- of its new owner.
B&I Lending, which originates government-guaranteed loans to small-town businesses, recently sold a majority stake to Hovde Financial Inc., a Washington investment bank, for an undisclosed sum.
The transaction will allow B&I to tap Hovde's community bank contacts and provide access to more capital. Hovde currently holds stock in approximately 120 banks nationwide with assets of less than $3 billion."Hovde has larger resources that can support our continued growth," said Mike Thomas, B&I's chief executive.
Last year B&I funded 13 loans, valued at $42.9 million, under the Department of Agriculture's rural development and business program. Its goal is to double that volume by teaming up with small banks that are constrained by legal lending limits.
Mr. Thomas said B&I would help community banks keep deposit relationships that are often lost to regional banks and specialty finance companies that can fund bigger loans. "We think our program is a great way for community banks to keep their best accounts," said Mr. Thomas, who plans to spread the word at the Independent Bankers Association of America conference next month in San Francisco.
The USDA program is geared to businesses in towns with fewer than 50,000 people. The loans, which are used primarily for construction, equipment, and to help stimulate facility expansion, can range from $1 million to $25 million.
Under B&I's initiative, community banks would originate the loan and approve the borrower. B&I would underwrite, process, and service the loan, including quarterly reports to the USDA, Mr. Thomas said.
B&I and the bank would share in the risk and guaranteed portion of the loan, and would split any fees.