Those are secured primarily by owner-occupied real estate and machinery and equipment. It helps the borrower because it generates significantly more liquidity. One of the key benefits is that the SBA term loans go up to 25 years in maturity. Principal payments are very manageable on a 25-year amortization schedule and SBA pricing is very competitive. Generally, it will be lower than the ABL revolver pricing.” Petro also pointed out that in many small businesses, especially in manufacturing and distribution, the owners of the business will also own the company’s facilities, but they’ll lease it to the business. “Owneroccupied property is definitely a key element to making these loans work,” she said. This partnership allows the asset-based lender to serve a broader universe of borrowers, which means their target market expands. “We also pay referral fees for funded term loans, so it’s another source of income for an asset-based lender. Another positive is that the Ready Capital senior leadership has deep ABL experience, so we ‘speakABL’ and understand that when coordinating a term, loan with an ABL revolver we have to be very responsive and deliver a loan closing on a timely basis,” Petro said. “Over the years, that’s been the biggest deterrent to asset-based lenders attempting to pursue a joint closing between an SBA loan and an asset-based revolver. Ready Capital can successfully match our process to the asset-based lender’s process.”
We had an average PPP loan size of approximately $63,000, which was well below the program average.” This loan size reflects Ready Capital’s focus on the smallest of small businesses, including many retail businesses and restaurants, most of which suffered serious ramifications from the pandemic. In October 2019, Ready Capital acquired Knight Capital Funding, which provides short-term, mostly unsecured, financing to small businesses. “It does that in a highly technology-enabled way and provides quick approvals and quick short-term funding, usually nine months or less, which is a different target market than asset-based lenders. But just as important as the business that was acquired is the technology that came along with it, which will allow us to produce our SBA loans and our commercial real estate loans more efficiently. Proprietary technology pulls credit reports and has optical character recognition for bank statements that migrate into the loan operating system. Ready Capital has started to utilize the technology in the broader business and we’re seeing great enhancements as far as productivity, efficiency and cycle times on processing all of our loans,” said Taylor.
“Like any business, we want to continue to grow, but we want to maintain our focus on helping small businesses. In doing so, we are developing new strategic partnerships, including mutually beneficial relationships with ABL lenders.”
Pandemic Effects
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Of course, the pandemic has affected just about every organization. “I think it caused us to rise to the occasion and find new ways to continue to service the small businesses that comprise our customer base. In many cases we’ve moved to an almost 100 percent work-from-home model and I’m happy to say that our employees and staff have been even more productive than they were. So, it’s been quite a learning experience for us, and we think will have lasting implications going forward as to how we manage our business,” said Taylor. Ready Capital was one of the most active PPP loan providers. “We funded approximately 40,000 PPP loans in the first round of PPP, lending to small businesses that were obviously hurt by the pandemic.
2021 Goals
Taylor spoke about Ready Capital’s 2021 goals: “Like any business, we want to continue to grow, but we want to maintain our focus on helping small businesses. In doing so, we are developing new strategic partnerships, including mutually beneficial relationships with ABL lenders.” Taylor explained Ready Capital’s competitive advantage is a high level of customer service and responsiveness. He commented, “We offer certainty of close to those partners and that’s very important for them to maintain their relationships. Our motto is Creative Solutions. Reliable Results.” When working with an ABL, Ready Capital aims to build a relationship that is mutually beneficial, promoting growth for the ABL lender while expanding Ready Capital’s market presence.
Michele Ocejo is director of communications for SFNet and editor-in-chief of The Secured Lender.