Published December 2002

First Heritage has big
plans for handling
small-business loans

By Bryan Corliss
Herald Business Writer

With the economy turning down, one of Snohomish County’s smallest banks is ramping up its small-business lending.

The Herald/ MICHAEL O’LEARY Walter McLaughlin (left) and David Ellis of First Heritage Bank are putting small-business loans on the front burner by adding personnel in that department and targeting new markets. Already, First Heritage ranks among the top providers of U.S. Small Business Administration-guaranteed loans in the Seattle district.

First Heritage Bank of Snohomish plans to double or even triple its portfolio of Small Business Administration-guaranteed loans during the next year or so, which would make it one of the top two or three lenders in SBA’s Seattle district.

It’s doing that by adding an SBA loan specialist and another loan processor to the existing group that handles those loans, and moving the whole department to the bank’s Monroe branch, where they will be better focused, said Walter McLaughlin, First Heritage’s senior vice president and the head of SBA lending.

The bank also is adding a Korean-speaking staffer and has targeted the region’s Korean-American business community as a new market. And First Heritage is looking to the south in hopes of capturing some King County business.

It may seem counter-intuitive to be planning for more small-business loans in an economic downturn. But in fact, “you see SBA volume actually rising in a bad economy,” McLaughlin said.

The combination of all the bank’s moves “will create more prospects,” he said. “It already has.”

SBA loans are backed by the federal government, which will guarantee up to 85 percent of the value of a loan, up to a $150,000 limit.

Loans greater than that are guaranteed at lower percentage rates. The maximum loan, under SBA’s main program, is $2 million, with the government guaranteeing half of that.

With the government’s guarantee that the bank will get most of its money back, “you can make a loan you wouldn’t make otherwise,” said David Ellis, First Heritage’s newly hired vice president for SBA loans.

The bank benefits from increased fee income, he said. As of Sept. 30, First Heritage had generated fees of $414,960, up from last year’s total of $338,005 for the same period.

Most SBA-backed loans go to small businesses looking to buy new real estate or equipment, Ellis said. Recently, a number of loans have been used to buy gas stations, he said.

First Heritage has a close relationship with the Small Business Administration and has been designated one of its preferred lenders, McLaughlin said. That speeds the paperwork process, which can otherwise take five to 10 days, to as fast as 48 hours, he said.

Having an experienced staff dedicated to SBA lending also helps, he said.

“We feel we have the highest concentration of SBA lending experience of any bank in the Puget Sound area,” he said.

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