Friendly competition between two lending groups led to a merger. Now the combined organization plans to use its newfound heft in a major growth push.
E.J. McCargar and Hank Kaan, over omelets in a Tampa breakfast joint in April 2015, chatted about a subject that up until then had mostly been an afterthought: a merger of two of the leading non-bank organizations in the Tampa-St. Petersburg region certified by the federal government to handle SBA loans.
Both organizations, the Tampa Bay Economic Development Corp., known as TEDCO, and Clearwater-based GulfCoast Business Finance, were around for 30 years. Both organizations, nonprofits, focused on SBA loans to entrepreneurs and business owners that banks overlooked for a variety of reasons. (TEDCO is not connected to the Tampa Hillsborough Economic Development Corp., a separate organization that promotes job growth and recruiting companies to the area, but doesn't handle SBA loans.)
“We've always had a friendly competition,” says McCargar. “There had been some loose flirtation about coming together, but it never got serious.”
Things got serous after that breakfast. A retired SunTrust Bank executive and GulfCoast Business Finance board member, Kaan and McCargar, president and CEO of TEDCO, agreed to pursue a merger.
A little more than a year later, after final government approvals came in June, the tie-up is complete. McCargar, 62, is president and CEO of the merged organization, renamed Sunshine State Economic Development Corp., or SEDCO. It has nine employees, offices in Tampa, Clearwater, Jacksonville and Miami and at least 375 active loan projects.
While the merger made sense to save on duplicative costs, McCargar says a key reason to combine forces is to loan more money to more clients statewide. The area from North Port in south Sarasota County to Fort Myers, he says, is especially ripe with underserved potential clients. “We fully believe the west coast of Florida is exploding,” McCargar says. “We are going to hit this market hard. We are going to be aggressive.”
The strategy is partially based on a lenders-must-be-seen philosophy McCargar learned when he was a young banker at CitiCorp in New York in the late 1980s. The idea is a heavy dose of networking, with bankers who refer clients and the clients themselves, is the only surefire way to grow a lending book of business.
Sunshine State Economic Development Corp. is a Certified Development Company. That means it's one of 270 organizations nationwide and seven in Florida the U.S. Small Business Administration authorizes to handle SBA loans in conjunction with a private lender, usually a bank. Other CDCs in Florida include Fort Myers-based IDS Corp. and Florida First Capital Finance Corp. in Tallahassee.
Just like TEDCO and GulfCoast Business Finance did separately for decades, the bulk of Sunshine State's work will be in SBA 504 loans. Those normally cover fixed-asset loans, including buildings and land projects. A private lender usually backs 50% of the total loan, and the CDC takes on 40%, with greater interest rate flexibility than a bank.
Sunshine State, with projects that pre-date the merger from each entity, is currently handling a variety of loans in industries that include medical, law, accounting and hospitality. Loans range from $250,000 up to a $15 million restaurant expansion in the Panhandle. McCargar, who previously worked for Barnett Bank and the Bank of Tampa, says Sunshine State seeks to expand its client base, including using SBA loan programs for women and minority businesses.
Says McCargar: “We try to take on the businesses that banks don't think are seasoned enough for a traditional loan.”
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