August 2007

Fremont Bank Launches Small Business Loan Program


East Bay Business Times

By Mavis Scanlon

Fremont Bank is zeroing in small businesses with a new loan and banking program. The Small Business Lending Initiative, which targets firms with $500,000 to $5 million in revenue, allows for quick turnaround of loan applications for companies that may not have the extensive financial records commercial lenders typically request.

Although Fremont Bank is not a preferred SBA lender, it has always offered small business loans. But until now the bank would request the same amount of information for a $100,000 credit line as for a $1 million line, said Dianne McDermott, director of small business lending.

"We wanted to have built-in efficiency," she said, and allow smaller businesses to take out these loans without the documentation needed for a larger loan. Loan amounts range from $10,000 to $100,000 unsecured loans to secured loans of $100,000 to $250,000; eventually the bank wants to bump up the program's loan limit to $500,000.

Now, rather than submitting two to three years of personal and business tax returns, a business license and articles of incorporation, the only paperwork the bank will require along with an application is a copy of a company's business license, two forms of identification and possibly utility bills. The bank will do additional checks to authenticate the validity of the business.

One driver of the new program is the bank's long-term objective of growing its loan portfolio, McDermott said. The small business segment is "an underserved or improperly served niche," she added.

Fremont is not the only bank that thinks so. As competition for loans has increased, more banks are setting their sights on smaller retail, nonprofit, manufacturing and professional service providers for interest income. Although big banks tout their national or global resources, community banks have commanded the largest share of the small business lending pie. In the Bay Area, a bevy of large national and regional banks including Wachovia Corp. and Umpqua Holdings Corp. have entered the market, while new community banks such as Alta Alliance Bank and the soon-to-open OneCalifornia Bank and California Bank of Commerce will be vying for different components of the small business segment. Wells Fargo & Co., which calls itself the No. 1 lender to small businesses by dollar volume, earlier this year agreed to buy Greater Bay Bank, which has an attractive small business and middle-market lending program. Wells recently launched a series of Webcasts geared to small business owners. Fremont's move also comes as legislation is moving through Congress that would shave fees on SBA loans, making that route potentially more attractive for small companies.

In the first quarter Fremont Bank saw somewhat sluggish loan growth of $68 million, or 4 percent. It ended the quarter with total loans of $1.6 billion and total assets of $1.9 billion.

To facilitate the application process, Fremont created a dedicated unit that is separate from its general credit administration operation. The program utilizes an underwriting product from Baker Hill Corp., a subsidiary of credit giant Experian Group Ltd., that processes all loan requests through a screen customized by Fremont - an automated process from a third-party vendor more typical of the system a larger bank would use.

"Streamlining is definitely the hot topic" said Bill Lilegdon, VP products group at Baker Hill, which has about 200 banks as clients of its Bank2Business platform. The speed with which a small bank can approve a loan through a streamlined process may win them a customer that otherwise would have gone to the larger competition.

If Baker's Bank2Business service denies a loan, a senior underwriter will review the application for other factors that may enable the bank to approve the loan and can override the denial. Like other community banks, Fremont will consider the potential borrower's character and history with the bank and the community in making its final decision.

Fremont Bank

Business: Banking and financial services
Headquarters: Fremont
Founded: 1964
President and CEO: Bradford Anderson
Employees: 479
2006 revenue: $105.8 million
2006 net income: $31.3 million
Address: 39150 Fremont Blvd., Fremont 94538
Phone: 510-792-2300
Web: www.fremontbank.com

mscanlon@bizjournals.com | 925-598-1405

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