After spending 20 years as a traditional banker, Robert D. McGee became a nonprofit lender to fund small businesses that need help to grow.

For the past two years, Mr. McGee has been chief executive officer of Southwestern Business Financing Corp., a Phoenix nonprofit financial institution that offers small but growing businesses funds for capital projects.

The nonprofit company is known as a certified development corporation; it makes loans through the Small Business Administration's 504 program.

"I'm still making commercial loans; the only difference is, I don't gather deposits," Mr. McGee said. "So I'm really still a part of banking."

These loans, which must create one job per $35,000 of financing, are meant to foster the growth of local businesses and job markets.

Mr. McGee said the Southwestern Business Financing Corp.'s loans have created one job for every $13,000 lent in the Phoenix area.

Companies that apply for a loan must have a net worth of $6 million or less and a net profit after taxes of $2 million or less. A bank finances 50% of the loan; the certified development company contributes 40%; and the small-business owner chips in the final 10% in the form of a down payment.

"I'm making loans that are focused on our community," Mr. McGee said. "It's real lending that increases the tax base and gets someone who doesn't have a job working."

Instead of viewing the Southwestern Business Financing Corp. as competition, many banks are referring clients with low collateral or limited credit history to the nonprofit lender.

Mr. McGee said 10 of the 35 banks in the Phoenix area actively participate in the loan program.

Frank Mendoza, a commercial loan officer with M&I Thunderbird Bank in Phoenix, said Southwestern Business Financing Corp. helps him develop relationships with business owners who don't meet his bank's lending standards.

"If it's an existing client, you can retain them; if it's a new prospect, then you've just landed a new client," Mr. Mendoza said.

A local banker referred the owners of La Canasta, a tortilla and corn chip manufacturer, to Southwestern Business Financing Corp. to finance the construction of a $2 million plant.

"With the SBA loan there is a tremendous amount of paperwork and forms and regulations that you have to comply with," said Roger Kelling, controller at La Canasta. "But the loan sailed through without any problems. They were very professional and extremely well versed in how to go about it."

Cooperating with a certified development cooperation means minimizing loss potential for the bank, avoiding servicing costs, achieving liquidity due to a strong secondary market for the bank's share of the loan, and perhaps earning Community Reinvestment Act credit.

"This is a way to use an intermediary that has more expertise and a better understanding of the target market," said Matthew Roberts senior deputy comptroller at the Office of the Comptroller of the Currency.

Although he has become a nonprofit lender, Mr. McGee said he retained the part of banking he enjoyed most-watching businesses grow and prosper.

"The idea that you've played a part in helping someone realize a dream is very satisfying," Mr. McGee said. "It's a very romantic thing to do."

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