The last time the name of any lender other than The Money Store Investment Corp. ranked first among lenders using the Small Business Administration's 7(a) loan guarantee program was in 1982.
In the nearly 13 years since the Sacramento, Calif.-based SBA lender first achieved the No. 1 ranking, it has developed a nationwide system of 65 offices. During the fiscal year ended Sept. 30, the company posted a 39.1% rise in new SBA loan volume, to $470.8 million. That's more than four times the volume of its nearest competitor, Heller First Capital Corp.
This nationwide network was built on a strong local presence that included underwriting and document preparation functions in 24 of its offices to accommodate the local SBA offices. "It was our intention to work as compatibly as we could with the SBA offices during those years," said Larry Wodarski, president of the company's SBA division. But like other financial institutions these days, The Money Store has had to change. On May 11, the company announced it was centralizing its SBA
loan underwriting and document preparation operations in one facility in Sacramento.
American Banker recently interviewed Mr. Wodarski about the reasons for this change in strategy and how he expects the company will benefit. Q.: What brought about this change of strategy? WODARSKI: Over the past couple of years, as we developed a lot of expertise in various regions, we were able to set up our marketing a little more efficiently. We did this by having our business development officers cultivate new territories and using our underwriting and credit expertise located in some regional offices. This is really just pulling it back one more step and having them derive their services from a more centralized base here in Sacramento. Q.: In what ways do you see this move helping the company? WODARSKI: Very clearly, this will be a much more manageable process in terms of implementation of our own policies and procedures. It will also help having the production units close by. So we expect the change will drive down the cost of the loans we put on the books. Q.: Are there any other benefits? WODARSKI: It will be less costly if for no other reason than being able to better balance our growing load of new loans. In the past we may have had one office that was very active and testing the production limits of their loan officers, while another market four states away was in a slump. Loan balancing is much more difficult when you're decentralized than when you're centralized. Q.: Where did you find the software you will now use? WODARSKI: We opted to spend the time to develop something proprietary that really fits our way of doing things. Over the past 15 years, we have developed a certain discipline in the way our loan and business development officers arrange the information for a loan application. We have built our system around giving them a consistent flow of information as they build their credit (file). Q.: What was your goal in developing this new system? WODARSKI: Over the years, we have attained a certain amount of credibility not only with the SBA but also with Wall Street, because of the quality of our underwriting. So anything we did by way of automation would have to meet the same exacting standards that we had built our reputation on. Q.: Do you use a credit scoring mechanism? WODARSKI: No, we do not. I know Fair, Isaac & Co. is involved in a massive project to introduce credit scoring in the SBA realm. It's intriguing. We have had our conversations with Fair, Isaac and we certainly want to participate in that arena, but at the moment we are not a credit scorer, and really don't have the capabilities to do it.