The path to Small Business Administration (SBA) lending for First Security Bank’s Itzel Meador has been a long and winding road — and a promising career journey, too.
The Dallas native came to Arkansas more than 20 years ago for her husband’s job. They located in Fordyce, a small town of fewer than 5,000 residents and the county seat of Dallas County in south-central, rural Arkansas. The two Dallases don’t have much in common.
Meador, a University of Texas at Dallas graduate, found work in short fashion for Little Rock-based Arkansas Capital Corp. as a loan assistant. She quickly elevated to a lender position and cut her teeth with a portfolio of SBA-backed loans.
Meador credits Sam Walls, the longtime former leader of ACC, as a great role model for her early career.
“Sam Walls was right by my side. He really showed me how to be customer-oriented, very good at listening with customers and trying to find ways and opportunities to fix a problem,” she said. “I got to see firsthand how problem-solving is really important in banking and especially when it comes to economic development. He helped me think outside of the box a lot and groomed me that way.”
After a 10-year career at ACC, Meador worked for two other banks in SBA lending before her current role as SBA lending director at First Security Bank.
“We’ve created something from nothing, so it’s going to take some time to get us where we need to be. In a very short time, we’ve already seen a lot of momentum,” Meador said.
Searcy-based First Security Bank, which has operations throughout Arkansas and a sizeable market share in Northwest Arkansas, was the largest bank in the state without a dedicated SBA division. Meador’s hiring in April 2021 changed that.
John Rutledge, First Security Bank Regional President, said the bank previously used third parties, such as Arkansas Capital Corp., to utilize SBA services. With Meador on board, he foresees much shorter time frames on SBA loans, but more importantly, new options to offer clients of the community bank.
“We’ve always said our customers get to choose when they get to bank with us and when they don’t. It’s always on their time, not ours. This is another example of trying to put that decision on them hopefully,” Rutledge said. “We hope, over time, with Itzel’s ability to help our communities and our bankers and our markets gain more knowledge and comfort and confidence with SBA, and what’s out there and what’s possible, that SBA will be an option upfront for the customer.”
According to the federal agency, there are three major programs under SBA guaranteed loan funding, which saw a 64% increase in 2021 to $208.9 million. The product lines include the 7a, 504, and Microloan programs.
The most active program revolves around 7a loans, which provide government-guaranteed loans to small businesses to boost liquidity for working capital and eliminate borrower origination and other fees. The SBA said the program supported or created 3,834 jobs in Arkansas in the past fiscal year.
The 504 loan program offers long-term, fixed-rate financing of up to $5 million for businesses. It is primarily tied to fixed assets, and the borrower has to show business growth and job creation opportunities for a community.
The Microloan program provides loans up to $50,000, but many are smaller. The average loan was around $23,000 last year. Two enormous targets for the Microloan program are small businesses and nonprofit childcare centers.
In total, 25 in-state lending institutions make SBA loans, while 51 out-of-state financial firms lend through the SBA. There are much higher participation rates for SBA loans in underserved communities and businesses that are women-owned, veteran-owned, or owned by people of color.
Meador said she is presently working with various businesses ranging from medical practices to startups to franchise owners and business refinancing. She’s been surprised at how active the environment has been.
“SBA does the best in tough markets when the economy is a little rough. That’s when SBA flourishes, and people really value the programs,” she said.
One of her most memorable transactions involved a father who eventually wanted to transfer his business to a son. The company was primed for an acquisition to grow even further, and the rural nature of its location meant significant jobs for a small town in western Arkansas.
Though the owner could have put up all of his retirement savings as collateral for a conventional loan, it would have meant sleepless nights for years wondering if his investments were safe. Meador showed the owner, a savvy businessman with a background in finance, how an SBA-structured loan could reduce collateral and secure significant working capital. The deal worked perfectly.
“He said, ‘You are the first person who told me I could do this for less. How is that possible?’
“I told him SBA wants you to have a backup. They don’t want you to use all of your chips. You’re looking at it through a conventional lens. I’m telling you this through an SBA lens because they want to promote economic development. When we got done, he said, ‘I should have called you so much earlier.’”
Meador emphasized that the “economic development” aspect of SBA lending is one of the main reasons the programs exist. The SBA wants job creation and preservation and offers longer-term funding than conventional loans because of that mission.
“This was a very small community that needed that business. People don’t realize that buying a business means just as much economic development as starting a business. Because if they go away, that’s the main supplier of jobs, and that’s a big deal,” Meador said.
Rutledge said the SBA guarantee is one of the attractive things about adding it as an option for clients to consider. It may not be the best option, but it may be a good option. And ultimately providing all opportunities and letting clients decide what they may view as optimal is the goal.
“What’s neat about SBA is it can do a huge deal, but it can also do the little-bitty, mom-and-pop, one-off where they don’t have family to step in. It’s the store manager; it’s the sales manager. It’s somebody who would not normally have the opportunity to buy something like that,” Rutledge said.
PANDEMIC ‘CONFIDENCE BOOSTER’
The SBA has been around since the Eisenhower administration, but the COVID-19 pandemic that erupted in 2020 was a breakthrough for bank utilization nationally. The SBA was charged with overseeing two aspects of pandemic financial relief: the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL).
Rutledge said First Security Bank was eyeing the launch of an SBA program internally before the pandemic. Still, the lessons learned during PPP were a “confidence booster” for starting its own SBA program.
At First Security, Rutledge and Meador said that all options are on the table when a client comes in. They aren’t automatically steered to a conventional loan or the SBA route. The goal is to find a solution that works.
“In our business, there’s not a greater feeling than knowing you helped a customer. That’s our great reward,” he said.
Meador said, “I never want to force a program on somebody if it’s not meant for them. It does take a commitment to go SBA, and there are some pluses and minuses to going SBA. I like to let the customers know ‘here are the positives, here are the negatives.’”
“There are times where it only fits SBA because it is a startup, and they don’t have the capital. And this is the only way to make it work. There are times, because we are a community bank, we’re flexible. We may go conventional, and that’s OK,” she added.
Meador said she’s fielding calls and inquiries from older people looking to sell businesses — women-, veteran- and minority-owned business opportunities; younger people looking to start something from scratch; and potential mergers or acquisitions as industries consolidate in the post-pandemic economy. Her pipeline is plenty full at the moment, but she predicts more activity over the next two to three years. It may be generational change, and it may be the COVID effect on workers. Whatever it is, it has the phones ringing.
“I really feel like in the next two to three years, the economy is going to drive a huge force of business acquisitions. I’m seeing a lot of younger generation folks who are entrepreneurial,” she said. “And that will keep me pretty busy.”