Transforming SBA Lending: How Chris Hurn is Reshaping Access to Loans for Small Businesses
By Brandon Kochkodin, Forbes Staff
The Small Business Administration (SBA) loans are a critical resource for entrepreneurs in the United States. These loans are federally guaranteed, making them attractive to banks while simultaneously providing significant economic support. Notably, approximately 20% of the American workforce is employed by companies with fewer than 20 employees. However, despite the benefits, there is a notable reluctance among banks to engage in these loans.
Challenges in Accessing SBA Loans
In 2024, a staggering 9,000 federally insured banks and credit unions existed in the U.S., yet only 1,452 participated in offering SBA 7(a) loans, which are the primary loan vehicle for small businesses. This figure reflects a persistent decline outside the pandemic emergency era, indicating a 9% drop in SBA lenders since 2017.
According to community banks, one significant barrier to engaging in SBA loans is the complex compliance requirements involved in the process. Banks face the daunting task of navigating intricate paperwork, where any missteps could jeopardize both the borrowers and the banks themselves. This intricate web of regulation often deters community banks from participating in SBA lending.
Introducing Phoenix Lender Services
Chris Hurn, a prominent figure in small business lending, aims to transform this landscape. With the establishment of Phoenix Lender Services, Hurn has assembled a dedicated 40-member team that focuses on managing the underwriting, servicing, and liquidation aspects of SBA loans. This streamlined approach allows community banks to engage in SBA lending without the need to develop extensive internal infrastructure.
Hurn, born in Peoria, Illinois, began his journey in SBA lending during the 1990s. Following a successful tenure at GE Capital, where he gained insights into small business lending challenges, he founded Fountainhead Commercial Capital in 2015, which facilitated over $28 billion in small business financing, largely through SBA loans. Now, he has transitioned his expertise to Phoenix Lender Services, a subsidiary of Community Bankshares, Inc., in LaGrange, Georgia, where he is now one of the largest shareholders.
The Value of SBA Loans
Hurn passionately advocates for the necessity of SBA loans, noting that prominent companies like Apple, FedEx, and Oracle have benefited from such loans at various points in their histories. He contends that small businesses are often underserved, especially as larger banks tend to shy away from these loans. Despite some major banks increasing their SBA lending during the COVID-19 pandemic, their participation remains limited.
The 7(a) loan program, established in 1953, offers guarantees of up to 75% on loans up to $5 million, enabling banks to extend credit based on projected cash flow rather than requiring full collateralization. This flexibility significantly benefits entrepreneurs, as repayment terms can extend up to 25 years—far longer than most standard business loans.
Financial Benefits for Lenders
From a lender’s perspective, one key advantage of SBA loans is the ability to sell the guaranteed portion on the secondary market for a premium, which generates substantial immediate revenue while still collecting interest on the unguaranteed portion. Hurn estimates that banks would typically need to invest $1.5 million to $2 million to enter the SBA lending space, which often includes hiring necessary staff.
Hurn positions Phoenix Lender Services as a solution to these challenges, promoting the outsourcing of loan servicing to facilitate easier market entry. The service fee usually ranges from 1% to 3% of the loan amount, allowing banks to access SBA loan expertise without the associated overhead costs.
The Landscape of SBA Lending
Despite skepticism towards government involvement in lending, SBA loan guarantees receive broad support among various stakeholders. Hurn observes that while many banks view SBA requirements as burdensome, lowering the barriers to entry and enhancing lender support could improve the availability of these loans for more small businesses. He stresses the need for these loans to be the first option rather than a last resort.
Personal Background and Experience
Hurn’s roots in small business run deep; he grew up assisting his mother in her candy-making venture, which left a profound impact on his understanding of entrepreneurship. After earning degrees from Loyola University in Chicago and the University of Pennsylvania, Hurn gained meaningful experience in lending through various roles, including key positions in companies focusing on SBA loans and small business financial services.
Through Phoenix Lender Services, Hurn is well positioned to rejuvenate the availability of SBA loans in the banking landscape, harnessing his extensive knowledge and network to bridge gaps in service.
