Obsession with the scattered collection of lists has expanded beyond small banks as SunTrust Banks Inc., Wells Fargo & Co., PNC Financial Services Group Inc. and others offer more government-guaranteed business loans. Large banks see mom-and-pop lending an entry point for selling other services such as payroll and cash management — all welcome at a time of scarce revenue opportunities.
Moving up the ranks is worth more than bragging rights, experts said. A bigger share of a lucrative market is at stake, as small businesses like hotels and restaurants use SBA rankings to choose a lender. They're important for referrals, and give banks an idea of how well they are competing.
SBA rankings for the fiscal year that ended Sept. 30 will trickle out this month.
"I anxiously want to see where we stack up against the industry in the fiscal year," said Jeff Nager, senior vice president and SBA division executive of SunTrust. "Seeing who is playing in this game right now is important, and there may be some new faces out there."
SBA lending could surge in the fourth quarter after legislation enacted in September extended until yearend key SBA incentives first adopted in 2009. They include waivers of borrower fees and government guarantees of 90%. Lawmakers also permanently raised the maximize size of SBA loans to $5 million from $2 million.
A good ranking can serve as a marketing asset for big banks, experts said.
"It says that we're small-business-friendly," said Lynn Douthett, district director of North Carolina for the SBA. "It puts them head and shoulders above their competition."
The SBA generally ranks SBA lenders by the number of loans they offered. Larger banks tend to emphasize the dollar amount.
"It's very competitive. They all want to be the numero uno" in the SBA rankings, said Jim Bek, executive vice president of Superior Financial Group LLC in Walnut Creek, Calif., a niche lender that is one of the most active SBA providers by volume. "These guys are excited because they are going to get into the local business newspapers. "
Community and boutique lenders used to dominate SBA lending, though large lenders have always had a presence in the market. But the latter are becoming even more involved.
Brian Moynihan, the chief executive at Bank of America Corp., unveiled plans Thursday to hire more than 1,000 small-business bankers across the country over the next 18 months. "These bankers will focus their attention on businesses that generate under $3 million annually in revenue," he told attendees at a Chief Executives' Club of Boston meeting. Bankers would work with small businesses in areas such as credit, payroll, cash management and retirement plans, Moynihan said.
SBA loans offer many attractions. They require little or no reserves since the government is responsible for the bulk of any losses. Banks can also sell them in the secondary market, where guaranteed SBA loans are fetching premiums of 11% to 12%, Bek said.
"It's a no-risk proposition," he said. "I imagine more of them are selling them today than ever."
Most banks are obsessed with selling multiple products and services to a single customer. So most SBA loans aren't as important as the lending relationship, which big institutions see as an opening for offering a growing business other services, like treasury management.
Another enticement is that the definition of "small business" changed to let larger companies qualify for SBA loans. As of October, hotels with annual sales of $30 million may qualify for an SBA loan. Previously hotels had to have sales of $7 million or less to qualify.
The SBA has more than 50 district offices. Some release local rankings. Others don't. The SBA's main office handles national results, which rank the top providers in the country. As of Thursday, national numbers were not yet available. Some regional results had become public.
In Virginia, gains by SunTrust, Wells Fargo and PNC in fiscal 2010 show larger banks emphasizing the sector. SunTrust rose to No. 2 from No. 3 in Virginia. Its total SBA loans rose 38%, to 72. The total value of its SBA loans more than doubled, to $13.2 million. Wells Fargo's 42 loans worth $14.4 million were well in excess of the combined activity in 2009 of Wells Fargo and its Wachovia arm, which it acquired in late 2008. PNC, meanwhile, surged to 14th place from 38th.
"It does show you who is out there making loans. The rankings are important," Nager said. "They're not why we do it, but they show us a good baseline of where our production levels are."