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REVIEW SUMMARY
What. Lee County's “Lee Is Lending” small business loan program.
Issue. Referral program gives preference, free marketing to banks.
Impact. Only two loans from one bank in six months.
Should a local government office be in the business of pre-screening and referring potential small business loan clients to area banks? That's more or less what's happening at the Lee County Economic Development Office, which rolled out its Lee Is Lending program in September.
The program, intended to facilitate business expansion by bringing businesses together with lenders, has had little success since it began. Of the county's 38 banks, 18 of them signed agreements to participate. That group includes large banks and community banks, but not other lenders, such as mortgage lenders who also make small business loans.
In its first six months through April 30, two loans resulting from the program total $255,000. Both of those came from the same Regions Bank office in Fort Myers.
Planners of the program admit it missed its goals during execution, and its first loans may be its last.
“We wish it had done more,” says Jim Moore, executive director of Lee County's economic development office, and chairman of Florida Gulf Bank, a Fort Myers-based community bank and a program partner. “It was a good-faith effort on our part to match borrowers with worthy lenders.”
That effort mostly came in the form of a marketing initiative using existing channels for in-kind services such as utility bill inserts and a digital billboard in partnership with Lamar. The county spent $5,300 out of the Industrial Development Authority's budget by leveraging that with its advertising partners to market the program in the fall after it began.
But that early ad blitz soon faded to the point that the Web link to the program disappeared from the economic development office's Fort Myers Regional Partnership website. It's only recently been restored and can also be found in a list on the Lee County government home page. “This program is not being as heavily promoted as it was,” says Jennifer Berg, marketing and communications director for the Fort Myers Regional Partnership, a consortium run by the economic development office.
The list of bank contacts on the site is also outdated. It includes several names of bankers who are no longer with the bank. One bank that was not on the list admits it received a couple emails about the program. A banker there, who did not wish to be named, says, “We dropped the ball.”
Though there hasn't been much in the way of loans for banks to report, participating banks haven't been particularly good at reporting referrals monthly as required by the one-page agreement each signed to participate.
“It's kind of like pushing a string,” says Moore. “We want them to report so we know how it's going.” He adds, “If they're not getting much activity, there's not much motivation to report. If they don't choose to report, it's hard for us to make that happen.”
One big bank noticeably missing from the list is SunTrust, one of the Small Business Administration's preferred SBA lenders. The bank is on the list of 29 banks invited to participate, but a bank representative in charge of small business lending in the region claims the bank is unaware of the program.
And it doesn't appear all the banks that do business in the county were invited. The FDIC lists 38 banks with at least one branch in Lee County. Banks on the FDIC list but not on the county's invitation list include Royal Palm Bank of Florida, Southwest Capital Bank, Liberty Bank and Bank of Naples.
Partner banks don't appear to have done much to promote the program, either. For example, KeyBank's Joseph Ariola, a senior vice president and commercial lending sales manager, explains that because KeyBank has offices in other states it wouldn't work to promote a local program on its website. Ariola says he did make attempts to promote it by word-of-mouth, but it never led to a loan. “I think I've had less than half a dozen conversations with end users on it,” he says. “They sort of dropped off the vine,” he recalls, but he also notes, “They weren't bankable under our standards.”
Speaking to the program's lack of recognition, Commissioner John Manning, a member of the Horizon Council's executive committee, thought Lee Is Lending was a program for small businesses that don't otherwise qualify for a regular bank loan, what he termed a micro-loan program.
Free leads
Berg says she helped develop the program working with the county's Industrial Development Authority. “The thought process behind it was to stimulate activity within the economy and to serve as more of a referral system,” Berg explains.
The county office, however, doesn't actually refer potential borrowers to a particular bank, according to Berg. It hosts the LeeIsLending.com website and manages the marketing campaign to connect qualified borrowers and lenders. The office then provides “basic pre-screening” to determine if a business has a business plan or other necessities to apply for a loan.
Unprepared businesses are referred to the Small Business Development Center at Florida Gulf Coast University, or SCORE — a small business mentoring program affiliated with the U.S. Small Business Administration.
A seven-step flowchart outlining steps in the Lee Is Lending program states that all businesses are first encouraged to work with their current bank. Berg explains that if the business doesn't contact its current bank then the office provides a list of the 18 banks on the program's website. “It's our attempt at a marketing initiative,” Berg says.
The banks agree to identify programs that match lending criteria of a bank to the borrower, but if the bank can't help a borrower, it agrees “to inform the [economic development office], which will make further referrals within the Lee Is Lending program.”
But a referral only means pointing the borrower back to the list of 18 banks.
KeyBank's Ariola and other program partners see the value in the program as free advertising, courtesy of the government office. “It's free leads,” says Ariola. “It's someone else doing the heavy lifting. It's kind of a credible source to attach myself to.”
Banks only
Berg says pointing loan-seeking businesses to the list of 18 banks allows the program to avoid promoting one bank over another. Yet by limiting the list, the program does not promote other lenders that make small business loans, such as Hamilton Funding Group, primarily a residential mortgage lender. Only state and federal chartered banks were invited to participate in the program.
But interestingly, at least two of the 31 total referrals that came out of the program were for refinancings of home loans, so uninvited non-bank mortgage lenders are losing out on that opportunity, too.
Dave Kane, a loan originator and sales manager in the Cape Coral and Fort Myers area for Hamilton says he's done commercial loans for warehouses and a few apartments, but had never heard of the county program.
Kane, who's also secretary of the Florida Association of Mortgage Professionals, says he'd like to have had the opportunity to participate. “I wouldn't mind it all,” he says. “A lot of people probably wouldn't mind getting a few referrals.”
Richard Peek, the association's president, says its “ ... unfair to them just to say they don't fit in that classification .... They should be able to participate.”
Moore says there wasn't any conscious effort to exclude other lenders, but admits, “I guess we could have done more to find out who had ever touched a loan in Lee County.”
David Hall, a banker with Sanibel Captiva Community Bank, however thinks it should be limited to banks because they're more regulated than non-bank lenders, which Hall views as “a valued customer service.”
Whether banks or other lenders can be program partners may be of little consequence. Moore plans to phase-out the marketing of the program to focus on other efforts, though he doesn't have plans to do away with it.
Few may get upset over that move. But Regions Bank's Pat Kirkpatrick, who made the only two loans so far, says that although he didn't know what to expect going in, he'd like to see it continue. “In both cases it helped the companies because of the expansion and better cash flow,” says Kirkpatrick. He also adds that he expects to do future business with the two new clients, both new ones.
Though it's worked for Kirkpatrick, it's not working particularly well for everyone else, which Moore acknowledges.
“If something doesn't work, you direct your attention to something else,” Moore says. “We haven't gotten good results,” he notes. “You don't want to fish where the fish aren't.”
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