Skip to main content

A small-dollar business lending scheme finds a niche at Huntington. American Banker Newspaper. 11.22.24


Huntington Bancshares' Lift Local small-business lending program started small, but after four years, it's become one of the $201 billion-asset company's more popular product offerings.

Executives at Huntington Bancshares said the $201 billion-asset company's 4-year-old Lift Local Business lending program has far exceeded their expectations. 

The numbers tell the story. Huntington launched Lift Local in October 2020 with a $25 million lending budget. It folded the program into the ambitious five-year, $40 billion community development strategy it unveiled in June 2021, boosting its lending threshold to $100 million. Last month, Huntington disclosed Lift Local has made nearly 1,900 Small Business Administration loans totaling $133 million.  

And while Huntington has made good on more than 75% of the community strategy's $40 billion overall commitment, there appear to be no plans to wind down Lift Local. "We're continuing to invest in the number of people that are working on the program, and some of the technology and protocols we put in place to support it," Small Business and SBA Director Maggie Ference, said in an interview. "We're increasing the number of community outreach events we do."

Huntington aims Lift Local at underserved communities, minorities, women, veterans and residents in low- and moderate-income neighborhoods. According to the bank, about 40% of Lift Local loan dollars have gone to Black and Hispanic entrepreneurs. Women and veteran entrepreneurs received an equivalent amount.

Huntington has been the nation's No. 1 SBA 7(a) lender seven consecutive years. During SBA's 2024 fiscal year, which ended Sept. 30, Huntington approved about 7,600 7(a) loans for $1.53 billion. More than 700 of those, totaling about $56 million, were Lift Local loans. Overall, Huntington's average 7(a) loan size in fiscal 2024 was $202,000. The average size for Lift Local loans was approximately  $71,000. 

Under 7(a), SBA provides guarantees ranging from 50% to 85% on loans made by banks and other private-sector lenders.

The program has become one of Huntington's most popular product offerings. Ference said she was quick to receive inquiries about Lift Local from groups in the Carolinas and Texas after Huntington announced its recent expansion plans. In March, the Consumer Bankers Association awarded Huntington its Joe Belew Award for its work with Lift Local. 

Huntington will continue Lift Local, "not as a finite fund, but as a movement of, how do we find ways to be better partners, how do we find ways to be more to the small-business community," Ference said. 

Lift Local offers loans of $1,000 to $150,000. Along with capital, borrowers receive a bundle of other services, including financial education, a dedicated Huntington banker, and help accessing legal, accounting and other back office support services. 

"We're going to offer financial education. We're going to offer a banker … a champion in the branch that you can come and talk to any time, that's going to know what's going on in your business," Ference said. "And we're going to give you really patient capital at a low rate along with all these other products and services."

By all indications, the combination of credit and a broad-based support effort appears to be producing solid results. Lift Local credit losses "continue to outperform our expectations," Ference said. 

"When we originally wrote the business plans, we were looking at traditional credit metrics that would tell us this is a space that banks shouldn't be lending in," Ference said. "Four years later, this program is performing at levels that, frankly, it shouldn't be, given the credit scores of some of the participants."

Huntington's experience with Lift Local serves as a hint that current bank underwriting is painting an inaccurate picture of the creditworthiness of many minority borrowers, William Michael Cunningham, an economist and investment analyst who specializes in impact investing, said in an interview. 

"What it's telling you is that credit policy for small-business loans has been out-of-whack for 30 years," Cunningham said. "Small adjustments in the lending process can have an outsize impact on performance. Banks need to take a deeper look at the people applying for credit, a deeper look at the credit procedure itself."

Huntington's ultimate goal is to move businesses past the need for Lift Local and similar programs. "Once we actually help them through that process … it helps legitimize them in a way that, when they come back for a second loan, they don't need the program," Ference said. "They're already scoring at a level that they could go to any bank in the country and continue to grow. What we love is that they keep doing it at Huntington."

By   John Reosti November 22, 2024, 4:05 p.m. EST 

Labels:

Popular posts from this blog

Kamalanomics: Home and Health

Vice President Kamala Harris recently unveiled her economic plan, which builds upon and expands several initiatives from the Biden administration while adding new elements aimed at addressing economic challenges faced by American families. Her plan, dubbed the "Opportunity Economy" agenda, focuses on lowering costs for essential goods and services, particularly targeting housing, healthcare, and groceries. Key Components: 1. Housing: Harris proposes constructing three million new homes to address the housing supply crunch, which is more ambitious than Biden's two-million-home plan. She also advocates for a $40 billion "innovation fund" to encourage local governments to find solutions to housing shortages and make it harder for investment companies to buy up large numbers of rental properties, which has driven up rent prices. (See: Comments to the CalPERS Board of Administration, July 15, 2024 on Housing and Environmental Investing.) 2. Healthcare: Expanding on B...
Read more

Maternal Health Financing Facility for Black Women: A Solution to an Urgent Problem

Maternal mortality is a significant issue in the United States, with Black women disproportionately affected. Research conducted by the Centers for Disease Control and Prevention (CDC) has shown that Black women are more likely to die from pregnancy-related causes than their white counterparts. However, the issue is not new, and despite the increasing amount of data available, the disparities have remained unaddressed for far too long.  Creative Investment Research (CIR) is among the organizations that believe there is a solution to the problem. Through our proposed impact investing vehicle , the Maternal Health Financing Facility for Black Women (MHFFBW), we aim to tackle the mortality gap and support Black women during childbirth, which will, in turn, benefit their communities. The Facility, based on legally binding financing agreements containing terms and conditions that direct resources to individuals and institutions capable of addressing supply-side conditions at the heart...
Read more

BRICS Summit 2023: Navigating the Transformation of Global Finance

Recent developments in the global financial landscape have captured the attention of the finance world, promising a new era of integration, transformation, and collaboration. Amidst the excitement, however, it is essential to acknowledge the formidable obstacles that stand in the way of realizing these ambitions. The 2023 BRICS Summit , slated to convene amidst this shifting landscape, is poised to be a significant juncture that could have profound implications for the future of international finance. The resurgence of Bitcoin, marked by an impressive, if smaller, year-to-date price surge, has underscored its enduring relevance. Similar concerns surround the exploration of central bank digital currencies (CBDCs). The UK's digital pound initiative, while forward-looking, raises questions about stability, security, and privacy and potential economic power imbalances. The notion of a BRICS digital currency, potentially extended to include several countries, reflects a desire to chall...
Read more