Small business loan manager walks away from P3s

“We think if we can prove that we can reverse loans in two weeks or less… that will be very powerful,” said Luke LaHaie, co-founder and co-CEO of Newity. He is now starting a small business nationwide Small Business Administration 7 (a). The company started building an online lending platform in May – the same month PPP lending ceased – and recently launched a pilot project that provided loans from 7 (a) small dollars to around 80. borrowers. On Thursday, Newity unveiled its 7 (a) lending portal to the wider market.

Luke LaHaie (left), co-CEO of Newity, and Rick Wayne, CEO of Northeast Bank. “At the end of the buying program… we started planning for the next phase of the business, which in our minds always meant 7 (a) loans,” LaHaie said.

The Newity hub has the potential to put the Chicago-based company, formerly known as ACAP SME, in direct competition with the SBA itself. The Biden administration’s 2020 budget plan includes funding that would allow the SBA to make and disburse direct loans of up to $ 150,000 – a move that could displace banks and credit unions that target the same Marlet. The SBA declined to comment for this story.

For Newity, which had purchased 115,000 PPP loans totaling $ 11.3 billion from banks as of June 2020, the 7 (a) loan appeared to be a natural second act. Like PPP, Program 7 (a) focuses on providing capital to small businesses, offering loan guarantees of up to $ 5 million.

“At the end of the buying program… we started planning for the next phase of the business, which in our minds always meant 7 (a) loans,” LaHaie said. He added that the 115,000 PPP borrowers whose loans Newity has purchased, with the help of Northeast Bank’s $ 1.4 billion assets, are at the heart of its strategy to build a business in the United States. nationwide.

“Small business owners still need capital,” LaHaie said.

Once it hits its stride, Newity expects to get up to 1,000 7 (a) loans per month, LaHaie said. If on track to meet that target, Newity would quickly reach the top 7 (a) lender rung in terms of number of loans.

Northeast continues to work with Newity, offering its capital and balance sheet to support the company’s SBA lending ambitions. The bank, which has made $ 3.3 billion in PPP loans and has earned around $ 31 million in fees so far providing correspondent services to Newity, is full of capital that needs to be tapped into, according to the bank. Northeast CEO Rick Wayne.

By comparison, the $ 174 billion asset Huntington Bancshares in Columbus, Ohio, the nation’s most prolific 7 (a) lender, closed 653 loans between Oct. 1 and Dec. 9, according to the SBA. In fiscal 2021, which ended September 30, Huntington entered into 4,366 7 (a) loans.

“We have approximately $ 240 million in Tier 1 capital, which is enough to double the size of our loan portfolio,” Wayne said.

While Newity wants to offer loans of up to $ 350,000, for now, it is focusing on the $ 18,000 to $ 25,000 loan market, which LaHaie and Wayne say are underserved.

“A lot of banks don’t want to make these really small loans,” Wayne said. “There are a lot of i’s to point and t’s to go through.”

LaHaie said the market today is served by cash advances from merchants and credit cards – “really expensive things.”

Initially, Newity will market within its pool of PPP borrowers.

“We think that’s a big advantage,” said Wayne. “We have all the information on them because we are already their lender. … If you are trying to find these borrowers nationwide, the cost of acquiring new customers can be very high.

“For most banks, are they really going to be a complete technology stack and team … for these small loans?” We don’t think so, ”said LaHaie. “We think a lot of them will choose to outsource us.”

At the same time, Newity plans to expand its customer base by soliciting referrals from banks. Since Newity and Northeast are more than willing to limit their contact with recommended borrowers to a 7 (a) loan grant, LaHaie expects lenders to be willing to recommend their clients.

Still, Bob Coleman, Coleman Report editor and longtime SBA expert, said a number of other companies were looking to start businesses based on recommendations from banks and other lenders, but did not reach the goal.

Wayne and other SBA bankers, including Nimi Natan, chairman and CEO of Gulf Coast Small Business Lending, a $ 2.6 billion Gulf Coast Bank and Trust unit in New Orleans, said the 7 (a) small loan market was underserved. by the banks, giving Newity’s plans an air of plausibility.

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