Excelsior Growth Fund is featured in Opportunity Finance Network Q&A
NEW YORK, July 23 2015 (CDFI Connect)—Nominations for the second annual Small Business Leader Award for Mission-Driven Lenders are open until July 27. Pat MacKrell, president and CEO of last year’s award recipient, New York Business Development Corporation (NYBDC) discusses how the 2014 Small Business Leader Award impacts his small business.
NYBDC, has been in business since 1955, and operates a robust small-business lending presence across New York State from eight offices. The award selection committee cited NYBDC in particular for “the size and scope of its robust portfolio of programs, partnerships, and products serving low-income borrowers, people of color, women, immigrants, and other underserved markets across New York.”
We asked Pat a few questions about the mission-driven lending of NYBDC and its newly formed CDFI Excelsior Growth Fund (EGF). We also spoke with Steve Cohen, the new President of EGF.
How do you know if you’re succeeding?
(Pat) As a “mission-based lender,” we look beyond simply generating shareholder value and return on investment. We keep in the front of our minds our broader mission of promoting prosperity and opportunity. We’re working on becoming more data driven, but our long record of impact speaks substantially to our success. As an organization, we’ve been at this almost 60 years, and just this year, we’ve loaned out hundreds of millions of dollars. That’s a metric in itself: providing a serious volume of commercial financing at reasonable rates to companies that need it.
Is it possible to quantify your presence??
(P) We have $1.3 billion in assets, and we have close to $200 million in loans. We have 100 employees, and we’ve been instrumental in creating or retaining 9,000 to 9,500 jobs per year. The jobs number is important. It’s the measure that really counts.
Is your lending limited to any particular type of business or business sector?
(P) We’ve done loans to gyms, restaurants, storage facilities, furniture place, construction companies, and many others. Our mission is to provide capital to facilitate jobs growth and economic development, and that means capital for all kinds of enterprise. Tugboat companies, wineries, microbreweries, dog-grooming services, just about anything you could think of we’ve done it, and some of our work has supported start-ups that have gotten big. Chobani yogurt was a start-up company in upstate New York when we first learned about them. We helped them get started.
Part of what you talk about frequently is your impact on minority-business communities. We notice you offer financial services in many languages. How did that multilingual presence come about?
(P) We reflect the communities we serve, and our staff comes from a broad array of cultures and languages. That’s part of our success, by the way, is in knowing the communities we work in, and in communicating with those communities in their native languages. We’re big on cultural and language alignment.
How do you find customers?
(P) Some of it is word of mouth, some comes from community development organizations, but most of it—80 percent—is through referrals from the many banks who partner with us and are unable to offer the sort of service and support we can provide. Banks know that as an alternative lender, we can quite often do loans they can’t. There are 124 banks that do business in New York who are members of our organization. They direct potential clients to us because we can spend a little extra time with them. We have a bigger appetite for risk than many banks do—that because of our mission-driven focus. We receive 80 percent from bank referrals.
Is there a business reason for why banks might refer potential customers to you?
(P) Sure, they know it is good business in the long-run—even if they can’t make a loan today—to help that customer, or potential customer, find the financial support they need. A customer will remember that gesture, and once they’re more established or once their business has really taken off and they are maybe not so great a risk, they will remember that bank or that banker when it comes time to get a bigger loan or a larger line of credit.
Does getting this award do much for an organization as well-established as NYBDC?
(P) It reinforces the idea—both internally and externally—that our business model works. It’s nice to get recognized by your peers and by OFN, we’re very humbled by it, but it’s also useful, I think, in helping people remember not just who NYBDC is but what community development financial institutions in general do to help build a more equitable economy. We going to use it specifically to support some of the business advisory services we provide.
Now for Steve. NYBDC formed an affiliate entity, Excelsior Growth Fund, to provide creative and flexible lending strategies. EGF received CDFI certification a year ago. How has developing a CDFI expanded the ability to reach underserved communities?
(Steve) NYBDC originally formed EGF as a not-for-profit 501(c)3 to do certain types of small business and community lending, such as the millions of dollars in lending after Superstorm Sandy. Getting CDFI status was a natural evolution and in line with the mission of providing innovative financial and advisory products to underserved entrepreneurs and those in underserved communities. EGF is poised for growth. Right now we are launching a major new online lending product, the EGF SmartLoan, which we think will help CDFIs get into this space in a major way. The product is transparent, simple to access, affordable, and will be approved in one day, funded in less than a week. We expect that having a responsible mission-based lender option out there in this rapidly changing marketplace will be beneficial to the small businesses we serve, which ultimately will lead to job creation and revenue generation in communities all around the state.
EGF will also expand the Business Advisory Services available to firms. Can you tell me about that?
(S) Many firms could benefit from more hands on assistance to help them access capital and grow their businesses. We have focused on the collection, presentation and analysis of financial information. This is an area where NYBDC and EGF have tremendous expertise and have offered such assistance to many clients seeking capital. But we’re not stopping there. We are currently building out a more comprehensive suite of advisory services where EGF will provide resources and direct services to improve financial management and several key areas of business operations. These services represent a key component of our strategy to help our target small businesses expand and create jobs.
This interview was condensed and edited.
The Small Business Leader Award for Mission-Driven Lenders is part of the Goldman Sachs 10,000 Small Businesses Financing Initiative, with additional support from the Goldman Sachs Foundation and the Surdna Foundation.
More here about this year’s Small Business Leader Award for Mission-Driven Lenders.