San Diego is home to companies of all sizes, ranging from the neighborhood pizza parlor to Fortune 500 businesses such as Qualcomm (Nasdaq: QCOM). It is the companies that fall in the small business category, however, that make up the majority of companies in our region.
Financing the growth of these small businesses is a key factor in the continued economic growth of San Diego.
Fueling this growth can be a daunting task at times. No two companies travel down the exact same path to success. Each company has its own growth strategies and its own set of financing requirements.
To better serve this all-important market, San Diego National Bank (SDNB) formed a community lending department in 2003. In just its second year of operation, the department increased its overall loans by 68 percent.
The creation of this department has made it easier for small businesses to qualify for SBA and small commercial loans. It provides commercial business loans up to $500,000 and commercial real estate and construction loans up to $1.5 million.
Many of these businesses are operating in industries such as professional services, which includes law, medicine, advertising/marketing, construction, biochemistry and biotechnology, telecommunications, printing, bulk food products, defense and maquiladoras.
Understanding the value of personal relationships with small business entrepreneurs, SDNB placed lenders in different areas of the county, and has established strong lending teams with various branch managers, allowing for more access to the community.
Community banks also distribute their loans in a different way than the larger, national banks. When a potential customer comes to SDNB, the loan officer takes the time to talk with the business owner and understand their industry and business before making a decision regarding the loan. This leads to the community banks financing more "out-of-the-box" businesses than the larger banks.
At the larger banks, this process is often times based solely on a credit score assigned to the business, resulting in many small businesses being turned down for financing.
"Many of the smaller businesses are startups or they are heavily reliant on selling just one product," said Terrece Madrigal, community lending department manager. "That makes them vulnerable to temporary downturns in markets. We know how to help them prepare and work through these cycles."
Steve Lopez, vice president of the community lending department, works with a variety of small businesses in the North County whose annual sales range from $1 million to $10 million.
"Many of these owner/user businesses are closely held companies that are currently seeking to purchase and finance new business condos," Lopez said. "The large number of business condos being built off of Palomar Airport Road and also in Escondido are reflective of the success of many of the small businesses here in San Diego. Owners are seeing the value in purchasing a business condo, which range anywhere from 2,000 to 10,000 square feet, and allow their business growth and flexibility. They can begin by purchasing an extra thousand square feet if they anticipate immediate growth, or they can add on as their business grows."
The SBA department at SDNB has financed several of these types of loans recently. The process depends on a close working relationship and an understanding of the issues that confront both the bank and the business.
By creating the community lending department, SDNB has been able to meet the financing needs of the wide variety of businesses based here. The success of this department will continue to grow as the economy increases and the thriving small business market in San Diego continues to develop.
D'Auria is senior vice president, commercial lending department, with San Diego National Bank.