A Financier’s Typical Whirlwind Day
It was a typical 12-hour day for small-business activist and loan consultant Rudolph Estrada.
Between 8:30 a.m. and 8:30 p.m., Estrada:
* Visited two businesses receiving Small Business Administration loans handled by his company which serves as the SBA loan department for 21 banks.
* Signed a contract with Torrance Bank to set up an SBA loan department.
* Received a fax from the White House inviting him to an economic powwow.
* Met privately with the deputy administrator of the Small Business Administration.
* Lunched with the president-elect of the California Bankers Assn.
If this wasn’t enough for this driven entrepreneur, Estrada also taught a college-level business class at California State University Dominguez Hills before heading back to the office to see what he’d missed during the day.
Who is this small-business Superman? Estrada, a member of the White House Commission on Small Business, is president and chief executive of the Summit Group located in South Pasadena. Summit’s 14 employees act as the SBA loan department for 21 big and small California banks.
This year, Summit, which Estrada founded in 1987, will help shepherd $25 million worth of SBA-guaranteed loans through the system, up from the $10 million worth of SBA loans booked in 1993. Thanks to careful, due diligence and understanding the in’s and out’s of the SBA system, Estrada says of the thousands of loans he’s handled, he’s never had a loan application rejected by the SBA.
While the SBA guarantees a portion of the loans, the loans are actually made directly by the banks.
His business has thrived because in recent years more and more banks, once leery of dealing with the government, have embraced the SBA loan guarantee program. Newly streamlined procedures, attractive fees and a willingness to work with the banks have brought thousands of banks into the SBA fold. However, dealing with the government’s regulations, which often differ from SBA district to district, requires a certain expertise.
Although the SBA offers a new streamlined documentation process for smaller loans, the application process is still daunting for most business owners. Many of them seek help from so-called loan packagers who promise to navigate the system. However, in recent months several SBA loan packagers have been criticized and disciplined for charging high fees and making promises they can’t keep.
Unlike a packager which works with the business owner, Estrada’s firm works for the banks, acting as their full-service SBA loan department. They handle everything from marketing to training as well as all the paperwork.
First Indo-American Bank in San Francisco hired Summit to act as its SBA lending department when the board realized it couldn’t afford to hire in-house people to manage the program.
“We simply could not have afforded the depth of talent Estrada has provided to the bank,” said Robb Evans, a board member and incoming president of the California Bankers Assn. Evans said the small community bank, with $50 million in assets, is refocusing its lending from real estate to business loans with Estrada’s help.
Evans, who also serves as trustee for the U.S. government in the Bank of Credit & Commerce case, said it was cheaper to hire Summit to act as its loan department.
The same was true for Sherman Oaks-based TransWorld Bank, according to Tim Weaver, senior vice president of corporate banking. Weaver said the Summit Group does all TransWorld’s SBA-guaranteed loan “back room work.”
“Without the Summit Group, we’d need five or six people at our bank,” Weaver said.
Estrada said a six-person SBA loan department could cost a bank about $500,000 a year when you include overhead and benefits. To do the same work for a small bank, Estrada’s firm would charge about $100,000.
Summit also receives a fee based on the growth of the bank’s SBA loan portfolio.
Later that day, Estrada stopped at Hershey Business Systems in Los Angeles to check on the disbursement of another $750,000 loan. Partners Keith Bambrick and Kent Boom said they will use the money to consolidate debt, buy new equipment for their high-tech document storage company and use what’s left for working capital.
Estrada, a former bank executive and SBA Los Angeles district director, has impressive stamina. A 46-year-old East Los Angeles native, his father is a barber and his mother a schoolteacher.
What does he like least about his business?
“The pressure of dealing with everyone’s priorities,” he said. “The level of stress and responsibility is very high in this business. Our goal is to put sound transactions on the books.”
Technically, the banks sign disclaimers saying they will not hold Summit liable if a loan goes south, but Estrada says he still feels responsible for every loan.
Does he worry about whether or not the business owners will repay the millions they’ve borrowed from his bank clients?
“I sleep with one eye open,” he laughs.
Jane Applegate is a syndicated columnist and radio commentator. She welcomes story ideas, although she cannot answer individual letters. Write to her at P.O. Box 637, Sun Valley, CA 91353-0637.
