Cleveland small business lender Growth Capital Corp. will be expanding its reach in Lake County and the surrounding area with the acquisition of Small Business Capital Corp. (SBCC) of Ohio in Kirtland.
Growth Capital president John Kropf said federal regulators approved the combination, which had been in the works for months, on May 30, adding a Small Business Administration (SBA) 504 loan portfolio of about $20 million in assets. That brings Growth Capital — the fifth-largest provider of government-backed SBA loans in Northeast Ohio — to about $150 million in assets today.
Founded in 1983, SBCC, like Growth Capital, is an SBA-certified development company (CDC). No money is exchanged with the combination, which will effectively dissolve SBCC.
SBCC was apparently struggling to grow its loan portfolio and had experienced some recent personnel turnover.
In April 2018, the group hired Randy Horst, who previously worked with PNC Bank as a credit risk officer, as its executive director. But Horst left that position earlier this year. In light of that, SBCC board president Allen Weaver of Erie Bank began seeking alternative options for moving forward. The Growth Capital board unanimously approved the merger, seeing it as the most efficient way to service its borrowers and the surrounding market.
Borrowers in the expanded market for Growth Capital may very well benefit from the heightened presence of a new agency that already has relationships — or is forging them — with agencies such as the Lake County Ohio Port and Economic Development Authority, Geauga Growth Partnership Inc., small business development centers and Lakeland College, among others.
“What could have been just this organization going under turns into a real opportunity for these small businesses to have access to these types of loan programs that maybe they weren’t getting before because (SBCC) was there,” Kropf said, noting that while the two entities would’ve been competitors for loans, each typically focused on its own markets in the past.
Consolidation among CDCs has been somewhat common in the past decade as regulatory requirements make running these lending agencies more complicated. Smaller organizations have opted to merge with others because of the challenges of keeping up with all the various compliance.
The most recent example of consolidation in Ohio prior to the Growth Capital and SBCC combination was probably the merger between HCDC Inc. of Cincinnati with the Stark Development Board Finance Corp. of Canton, which took place in July 2017.
Growth Capital, which received a $4.7 million loan from Fifth Third Bank last year in support of Community Advantage loans, lent out $4.3 million over 42 SBA loans in fiscal year 2018 (which ended Sept. 30), according to Crain’s research.