By Sherry Waner, Chief Development Officer, First Southwest Bank — a Community Development Financial Institution (CDFI) As community bankers, we are the financial backbone of our neighborhoods. We understand firsthand that when local small businesses thrive, our communities prosper. We strive to help our entrepreneurs and small businesses, yet we are often constrained by lending parameters. It is a scenario familiar to every commercial lender: A promising entrepreneur walks through the door, but the deal quickly hits a wall. Perhaps it is a startup with limited operating history, a collateral shortfall, an inadequate down payment or a loan-to-value ratio past the comfort zone. When we are forced to turn these borrowers away, the ripple effects are felt far beyond our balance sheets. We lose the opportunity to spark job creation, and more importantly, we risk souring a customer relationship before it even has the chance to mature. Navigating the Complexity of Gap Funding Many lenders are aware that risk-mitigating enhancements exist — loan guarantees, down payment assistance, credit reserve programs and specialized grants. These tools are designed specifically to mitigate risk and bridge the gap for traditional banks. However, the barrier to entry is high. The sheer complexity, specialized reporting requirements and administrative overhead of these programs mean that many community banks simply do not have the resources to utilize them effectively. A Case Study in Creative Structuring A few years ago, our institution was approached regarding a business acquisition in southern Colorado. A military veteran, who had risen through the ranks as a sales representative, sought to purchase a local company, along with two other employees, that had been a staple employer in the region for over 30 years. It was a strong business with a proven legacy, but the buyers only had a 5% down payment. Under traditional underwriting, the financing was a non-starter. By leveraging risk-mitigating funding sources, we were able to structure a creative solution: 95% financing with a 75% guarantee on a nearly $2.5 million loan request. The deal closed; the veteran and two other employees became owners, and a vital local employer remained intact. Saying “Yes” More Often This success story became a catalyst for our organization. We realized that lenders across the Centennial State and beyond were facing the same hurdles. To solve this, we developed HelloBello®. HelloBello® is a technology platform built by bankers, for bankers. Using proprietary algorithms and logic, the platform identifies risk-mitigating capital and credit enhancements tailored to specific community projects and Utilizing Risk‑Mitigating Technology Closing the Gap and Strengthening Community Lending Colorado Banker 8
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