NEW YORK -- Medallion Financial Corp., a specialty finance company that lends primarily to the taxicab industry, has asked regulators for permission to charter an industrial loan bank.
Medallion president Andrew Murstein said in an announcement Monday that the company wants to start a bank to lower its cost of funds. Industrial loan banks cannot offer demand deposits, such as checking accounts, but can accept certificates of deposit and other time deposits.
"We have been researching for some time now what the best long-term vehicle would be for Medallion to finance its growth and improve its profitability, and we have identified what we feel is an excellent solution," Mr. Murstein said.
Medallion has filed an application with the Federal Deposit Insurance Corp. and the state of Utah, where the bank would be based. Mr. Murstein said he hoped to receive approval within four to six months.
A number of nonbanks, including the automaker BMW and Merrill Lynch & Co., are chartered as industrial loan banks, and Wal-Mart Stores Inc. has filed an application to acquire a small one, Franklin Bank of California. Utah is one of a handful of states with an industrial loan charter.
Mr. Murstein said in an interview Tuesday that Medallion has historically received the bulk of its funding from banks, but that source has dried up lately as banks have scaled back on small-business lending. That is good news in terms of competition for small-business loans, he said, but it has made funding them more difficult.
About 60% of Medallion's loans are to taxi drivers. The company is also an active Small Business Administration lender, Mr. Murstein said, focusing chiefly on women- and minority-owned businesses.
Medallion has hired three financial services veterans to run the bank. John Taggart, formerly of Leucadia National Corp. of New York, has been named president and chief executive officer; Lew Goodwin, formerly with Providian Bank, is chief financial officer; and Don Poulton, who worked with Mr. Taggart at Leucadia, will be chief lending officer.