Arizona Federal is the only Arizona-based credit union with SBA PLP status. We were able to obtain this designation through the acquisition of Pinnacle Bank just one year ago. Pinnacle was a community bank I was proud to stand up back in 2005. Arizona Federal had obtained the designation by exhibiting a successful track record of processing small business loans and by displaying a thorough understanding of the SBA’s lending policies and procedures.
This was a proud moment for Arizona Federal, as the acquisition of a bank by a credit union was a first of its kind in Arizona and sparked a national trend, with numerous other credit unions (18) following suit in 2020.
What is more impressive is all employees from both organizations were retained, a point of pride for me, but something that manifested in the most positive way in 2020. Arizona Federal, like so many other financial institutions, answered the call to process more than 500 SBA Paycheck Protection Program loans, a feat that could not have been completed at such high volume if we did not have the full resources of both financial institutions.
What Does the Acquisition Mean to Customers?
The significance of this for the credit union and its member-owners is it opened up more commercial lending and business banking services, like residential mortgage and construction lending. On the flip side, Pinnacle customers that migrated with us now have access to Arizona Federal’s consumer services, like car loans, insurance and credit cards. Overall, it was a match that allowed us to bring a full suite of services under one roof for our member-owners.
Opening and running a small business is one of the most difficult and stress-inducing ventures a human being can take on. In Arizona alone, small businesses make up more than 99% of total businesses, which means there are a lot of brave souls out there willing to put it on the line with intent to create jobs, boost our local economy and make a better life for themselves.
When it comes to launching a small business, one of the very first questions all entrepreneurs must answer is how they will fund their burgeoning venture. Some may be lucky enough to have seed money to get started; others may have a family member who can help. But for the majority, small-business loans are the only feasible route.
Small business lending is not just for the new business owner, though, and, as we have seen in 2020, these loans can quite literally mean the difference between staying in business and closing. Many times, the window is very short, so expediency in securing that loan is of utmost importance. Recently, Arizona Federal Credit Union was designated by the U.S. Small Business Administration as a Preferred Lending Partner, which allows us to streamline the application process and provide faster decisions to small-business owners.
To break this down further, Arizona Federal has the authority to approve its SBA-guaranteed loans, which simplifies and speeds up the SBA loan approval process for borrowers. Nonpreferred lenders must submit loan applications to the SBA for approval, which can extend the loan decisioning process. Typically, a loan routed directly through the SBA could take several weeks, where we have seen loans processed as quickly as seven to 10 days. And, as COVID-19 has exposed, every week can make a world of difference.
Through the SBA 7(a) loans, borrowers looking to start, acquire or expand their small businesses can obtain funding for a wide array of needs, from working capital for expansion to debt refinancing, with a max loan of $5 million. The SBA 504 loans provide financing to business owners needing assistance on real estate purchases, with a $5.4 million cap on multi-use properties and $1.8 million on single-use properties.
As a not-for-profit, financial cooperative that is owned by our members, it is our mission to generate positive financial outcomes, whether for their personal finances or small businesses. When it comes to lending, small-business owners have numerous options. But from the standpoint of a credit union that operates solely in Greater Phoenix and Tucson and is an active supporter of Local First Arizona’s “Move Your Money” campaign, I cannot emphasize enough the importance or benefits of banking locally. When businesses entrust Arizona Federal or other locally based financial institutions with their hard-earned money, they provide us with the lending power to circulate money back into our community to the small businesses that need it most, with deep consideration of how that will positively affect our local economy.
Mike Thorell began his banking career in Scottsdale, Arizona, in 1989. Over the past 31 years, he has worked for various financial institutions and has founded a community bank in the local market. He has specialized in residential, commercial and SBA lending throughout his career, while also serving as the president and CEO for various community banks. Currently, Thorell serves as the president of Commercial and Residential Lending at Arizona Federal Credit Union.