Last year, TD Bank became the third largest SBA lender in the Maine-to-Florida region. Growing their portfolio to $1.5 billion in SBA and government-guaranteed loans has allowed them to help a lot of small business owners realize their dreams.
“We’re No. 3, behind only Wells Fargo and Live Oak,” said Tom Pretty, head of SBA lending at TD Bank. “We’re active in three main areas. It’s a great way to work with business owners to give them access to more capital than with a conventional loan. They get better terms so they can preserve the capital they have and use that money to run their businesses.”
The three areas where TD Bank helps small businesses include 7(a) loans, 504 loans, and USDA loans. Businesses use these loan programs to buy or lease equipment, set up credit for inventory and supplies, purchase real estate, acquire other businesses, buy out partners, and borrow against assets for future growth, just to name a few use cases.
How TD Bank is Different
There are three primary aspects to small business lending. They include rates, structure, and the relationship.
“We are strongest in two of three of them,” Pretty said. “We have very competitive pricing structures, and we have good relationships with our borrowers.”
That makes them the strongest bank in North America per S&P and Moody’s.
TD Bank’s flagship product is the 7(a) loan for loans of $5 million and less. Anything above that, they can lend through 504 and USDA.
“We created a process to streamline the loans from $350,000 to $5 million,” Pretty said. “Because we’re a preferred SBA lender, we need to make sure we do everything we can to do the lending.”
For loans under $350,000, TD Bank uses a streamlined human-based approach. While there are innovative automatic underwriting approaches available on the market, TD Bank is cautiously eyeing the market to see where it can meet the opportunity.
“If you get a commercial real estate loan at a conventional bank,” Pretty said, “you’ll have to put down 20 to 25 percent. With an SBA loan, it’s a 10 percent down payment. That’s significant cash preservation.”
Traditional Banking With a Unique Approach
In this day when traditional banks are partnering or starting their own FinTech and alternative branches, TD Bank has opted to remain traditional. “But we offer a lot of convenience to our customers via a retail network,” Pretty said. They’ve also got a huge presence in commercial banking through centers of influence, which refer deals from strong commercial bankers in the marketplace every day. “Most of our business comes internally from customers who may not be lending. They may be retailing or ready to buy a new business.”
Pretty said 65 percent of TD Bank’s loans come from this internal network. The other 35 percent come through cold calls, their website, or other sources.
TD Bank doesn’t turn customers away based on their loan request amount. Whether it’s a $25,000 line of credit or a $5 million fixed-rate commercial real estate loan, they try to work with each borrower to help meet their needs. If necessary, they’ll refer customers to other lenders.
“We do a lot of referrals to Axion,” Pretty said. He said they’re a preferred partner because on their non-profit status and they work with microloans.
While TD Bank is a traditional bank, they’re always on the lookout for partnerships and are interested in the FinTech sector as place to grow.
“It’s good for customers and the economy to find different ways for a business to grow,” Pretty said.
Pretty also said he expects SBA lending to grow in 2017.