A three-branch community bank in LaGrange, Georgia, is seeking to carve out a role as a national servicer of Small Business Administration 7(a) loans.
Last month, the holding company for the $176.2 million-asset Community Bank & Trust launched Phoenix Lender Services, both to originate 7(a) loans for itself and to service 7(a) loans made by other small lenders around the country.
For small lenders interested in SBA lending, Phoenix plans to offer a turnkey solution, including underwriting, closing and secondary market sales, along with servicing and liquidations.
"We'll be offering all those services to others who want to get involved in SBA, everything except for the origination side," Phoenix CEO Chris Hurn told American Banker, explaining that Phoenix plans to originate 7(a) loans for Community.
Long prominent in SBA circles, Hurn was founder and CEO of Fountainhead Commercial Capital, a well-known SBA lender acquired by Dallas-based Crossroads Systems in December 2021.
Most of his Fountainhead team — approximately 95% — followed him to Community, Hurn said. They began originating loans about a year ago.
Community had planned to acquire an existing loan servicing provider, but the deal fell through late last year. "That's when we pivoted and decided to stand up a servicing firm from scratch," Hurn said.
Hurn and his colleagues are already having an effect on the loan-origination side of Community's business. The bank, which totaled 23 SBA 7(a) loans for $28.4 million in the 2024 fiscal year, has closed 37 7(a) loans for more than $72 million in the first five months of fiscal 2025.
"That's the pace we hope to maintain for the rest of the year," Hurn said. "The pipeline is pretty substantial."
The goal now is to market Phoenix's back-office proficiency. The increase in 7(a) lending activity has resulted in sizable increases in commercial loans and interest income. The new servicing business could provide a similar boost to fee revenue.
Most of the institutions Phoenix sees as potential servicing clients probably can't afford to enter the space on their own, Hurn said. "The cost to enter SBA lending without a partner could total a couple of million dollars, and you probably wouldn't recoup that [investment] for 18 to 24 months," Hurn said.
According to SBA statistics, 1,105 lenders have closed 7(a) loans in fiscal 2025. The vast majority of them, 944, have made 20 or fewer, however.
"I think that's where the opportunity lies as a loan servicing provider," Hurn said. "If you're doing less than 20 SBA loans a year, it's really tough to do it with the level of expertise that's needed."
There's an even larger group of institutions, numbering perhaps 8,000 banks and credit unions, that have stayed outside the market altogether. "If we can bring in some more lenders who maybe aren't doing much in the SBA space, then we feel like we're contributing to providing more access to capital to small businesses — it's a good way to get more banks and credit unions involved," Hurn said.
Arne Monson, CEO of one the nation's oldest largest SBA servicing firms, the 43-year-old Holtmeyer & Monson in Memphis, said Phoenix's strategy is sound.
"There is a real untapped segment of community banks, especially smaller [institutions], probably $5 billion of assets and under, that want to get into SBA lending but don't know how," Monson said. "Maybe they had a bad experience. Maybe they lost a guarantee. Maybe they kind of made a mess. We continue to get inquiries virtually every week from those."
The Small Business Administration guaranteed more than 70,000 7(a) loans for $31.1 billion in fiscal 2024, which ended Sept. 30. Its guarantees are intended to provide lenders with a level of comfort — and protection — to make loans they might otherwise deem too risky.
The agency represents one of the largest sources of small-business capital, but private-sector participants in the SBA market need a significant level of expertise to comfortably navigate the agency's programs. Failing to observe SBA's rules could cause the agency to cancel its guarantee, leaving lenders on the hook for hundreds of thousands if not millions of dollars in loan losses.
"A small community bank … that would make six SBA loans a year, they can't cost-justify making the investment in training, in people, in software," said Monson, whose firm serves about 400 SBA lenders.
Community Bankshares, the holding company for Community Bank & Trust, is pursuing an expansion in U.S. Department of Agriculture lending at the same time it's ramping up its SBA business.
On Jan. 28, two weeks after it launched Phoenix, Community announced it had acquired one of the nation's largest USDA lenders, the Atlanta-based Thomas USAF Group, for an undisclosed sum. The privately held Thomas will continue as an independent subsidiary of Community Bankshares, even though Phoenix will also handle USDA loans.
"This acquisition reflects our unwavering commitment to transforming access to capital in underserved markets," Community Chairman Jeremy Gilpin said in a press release. "With the expertise of Thomas Financial Group and our shared values, we are building a new era of opportunity for businesses and communities nationwide."
The growth pushes in both USDA and SBA lending are positioning Community to meet the access-to-credit needs of rural communities and small businesses, according to Hurn.
Though much smaller than SBA, the USDA loan program operates in a similar fashion, guaranteeing loans made by banks and other lenders. The USDA's largest loan program, the Business and Industry Guaranteed Loan Program, was authorized to support $2.3 billion in loans in fiscal 2025.
