How One Small Bank Scales Business Lending — and Helps Others Do the Same
By Matt Doffing, Senior Editor at The Financial Brand
Simple Subscribe
Subscribe Now!
Executive Summary
- As SBA and USDA lending surges nationwide, Community Bankshares is scaling rapidly by outsourcing the heavy lifting through its Phoenix Lender Services unit.
- The bank has used fintech to serve the need for capital from small businesses by harnessing access to tax credits.
- Banks can now enter government-guaranteed lending quickly, without building costly infrastructure or waiting years to turn a profit.
Chris Hurn, president and CEO of Community Bankshares
In February, Georgia’s Community Bank & Trust launched what it called a “refund anticipation loan” to allow small business owners and self-employed individuals to access their tax refund faster.
When The Financial Brand reached out to Chris Hurn, president and chief executive officer of Community Bankshares – the parent company of Community Bank & Trust, based in LaGrange, Ga. – about the new product, the interview revealed that the refund anticipation loan was just one part of a larger innovation effort at the $217 million bank.
Beyond refund lending, the bank is investing in a new banking-as-a-service offering for banks, credit unions, fintechs, and even other lenders, potentially, through which they can launch and scale government-backed lending without building a team from scratch.
Starting with a Clear Small Business Need
Community Bank & Trust’s refund anticipation loan was created for self-employed entrepreneurs, who often have few options when it comes to borrowing.
“Self-employed individuals are the backbone of the American economy, yet they often lack access to the financial support available to traditional employees,” said Steve Jeffries, President of Community Bank & Trust. “By offering a refund anticipation loan on the SLFL tax credit, we are giving self-employed individuals the financial flexibility they need without having to wait on extended government processing times.”
Businesses apply for refund loans through Community Bankshares’ partner, a company Hurn founded, called Lendesca. The fintech handles the Sick Leave and Family Leave (SLFL) tax credit, also known as the Self-Employed Tax Credit (SETC), which is utilized by Community Bank & Trust to provide the loan. These tax credits are among the last remaining from the pandemic and are set to expire during the 2025 tax season.
“We saw that a tax credit can take a long time to come from the IRS. We saw an opportunity to take a fairly complicated government process and make it much simpler,” Hurn said. “Consumers often can get what’s called ‘refund anticipation loans,’ but with these, we could get business folks, who are badly in need of support, help faster.”
The partnership between Community Bank & Trust and Lendesca, which enables small businesses to access up to $32,220, is a story of its own. Get the details, including how it overcame technology hurdles to automate this new loan product.
With the launch of its first digital product under its belt, Community Bank & Trust now hopes that these micro businesses will grow and become small business prospects for the bank’s SBA and USDA programs as well. The bank is now prepared to help other institutions with the same opportunity.
Building to Help Business Lending
Community Bankshares is positioning itself to make significantly more government-guaranteed loans to small businesses and agricultural companies — and to utilize its expertise to assist other lenders as well. A significant step in that plan this year was the launch of a new unit, Phoenix Lender Services, in January.
Phoenix is a lender service provider for U.S. Small Business Administration and U.S. Department of Agriculture loans. It can facilitate all or part of the process for any lenders nationwide that want to offer SBA 7(a) loans or USDA business and industry loans. Its services include originating, underwriting, closing, and servicing loans, along with secondary market sales, portfolio management, risk analysis, compliance reviews, and regulatory support.
Phoenix also provides its services to Community Bank & Trust, which announced that it made nearly $70 million of these government-guaranteed loans across 14 states in the first quarter. The bank credited Phoenix with helping it originate, underwrite, and close $23 million of SBA 7(a) loans and $46.7 million of USDA B&I loans.
Plus, there is a large pipeline of loans to come, according to Hurn, who serves as the president and chief executive officer of Phoenix.
“It was a sleepy little community bank in West Georgia, about an hour outside of Atlanta, and now it’s a nationwide lender through its government-guaranteed lending programs, both on the SBA side and the USDA side,” says Hurn, who expects to maintain roughly the same quarterly lending volume through the rest of the year.
But, for a quick preview, the fintech developed a loan offering for self-employed individuals that appears to be entirely unique, with the bank providing the funding for those loans. “And we’re about to come out with some more fintech products,” Hurn says.
Taken all together, these moves illustrate just how creative and digitally forward a small community bank can be — and its journey offers lessons for others.
Small Business and Ag Loans Boost the Bottom Line
Hurn, who has been active in SBA lending for decades, is well-known in the industry. He is a GE Capital veteran who founded, led, and later sold two nonbank SBA lenders, Mercantile Capital Corp. and, more recently, Fountainhead Commercial Capital.
Hurn joined the privately held Community Bankshares in April 2024, and he estimates that about 95% of his former Fountainhead team has followed him there, coming on board in phases.
The growth they’ve helped fuel is impressive. At the end of the fourth quarter, Community Bank & Trust’s total assets had increased 60% from a year earlier, according to data from the Federal Deposit Insurance Corp.
Hurn says nearly all of its assets are the unguaranteed portions of SBA 7(a) and USDA B&I loans.
“It was a sleepy little community bank in West Georgia … and now it’s a nationwide lender.”
— Chris Hurn, CEO of Community Bankshares and Phoenix Lender Services
The government guarantee typically covers 75% of any 7(a) loans above $150,000 and up to 85% for smaller loans. B&I loans approved in the 2025 fiscal year have an 80% guarantee.
Lenders have to retain the unguaranteed portions of these loans on their balance sheet, which helps generate interest income and, because of various fees, noninterest income. They often sell off the guaranteed portions of the loans at a premium, which is another boost to noninterest income.
All of this has benefited Community Bank & Trust’s earnings. In the fourth quarter, its total interest income increased 68%, to $3.5 million, compared with the same period a year earlier, the FDIC data shows. Total noninterest income jumped 485%, to nearly $6 million.
The end result: a significant boost to the bottom line, as net income for the fourth quarter tripled, to $1.5 million.
Now, Hurn wants to encourage other lenders to draw on the expertise at Phoenix to make government-guaranteed loans for their own portfolios. “We actually counted it one day, and we have, like, 700 years of collective SBA lending experience on our team,” he says.
Read more:
- The Small Business Pain Points That Spell Opportunity for Banks
- CRE Outlook 2025: How a Bust Could Become a Boom
The Pitch: Let Phoenix Handle the Red Tape on SBA and USDA Loans
Government-guaranteed lending is a lucrative segment with growing demand from business borrowers. In the 2024 fiscal year, 70,242 loans worth $31.1 billion were approved under the 7(a) program, up from $28 billion in fiscal 2023 and $26 billion in fiscal 2022.
Hurn believes more lenders are interested in getting involved. But there are some challenges holding them back, which is where Phoenix comes in.
“It’s pretty cost-prohibitive to start an SBA department or division at a bank or credit union from scratch, and it also takes typically 18 to 24 months to become profitable,” Hurn says. He estimates the setup expense at about $1 million to $2 million.
“It’s a walk-before-you-run situation. Oftentimes, it makes much more sense in the early days to hire an LSP, such as us, to do some of those back-office functions. The bank would have to be the lender of record and has to make all the final approvals. But it enables a lender to take advantage of our expertise.”
Another reason some lenders avoid making SBA and USDA loans is that government programs can be challenging to navigate, and a misstep can result in losing the loan guarantee.
Keep An Eye Out:
About 2% of SBA loans lose their government guarantee because the lender makes a mistake of some kind.
“The big thing that they’re all scared about is having that guarantee denied,” says Bob Coleman, who is the founder and editor of the Coleman Report, a trade publication that focuses on small business lending.
The SBA ultimately honors the loan guarantee about 95% the time, according to Coleman. Of the remaining 5%, about half end up needing what the SBA calls a “repair,” where the lenders get dinged for missing something in their documentation, he says. An outright denial of the guarantee happens on about 2% of the loans, generally because of a mistake the lender made.
“They don’t want to be in that 2% category,” Coleman says. “So if they can outsource it to a vendor that knows what they’re doing, they’re going to feel a lot more comfortable about that.”
But, Coleman cautions, if a loan service provider makes a mistake on a loan, the bank is still held responsible. “In other words, the bank cannot outsource the risk.”
Read more:
Doubling the Size Limit on SBA Loans Is a Game-Changer
In Coleman’s view, Community Bankshares’ strategy of creating Phoenix to offer servicing for government-guaranteed loans is sound — and its timing is very good. Like Hurn, he expects SBA lending activity to increase, with heightened interest coming from both lenders and prospective business borrowers.
One factor is a bipartisan bill in Congress that aims to double the size limit on SBA loans to $10 million, specifically for small manufacturers. “That is huge, and that is going to get a lot of people’s attention,” says Coleman, who is confident the bill will pass. “If I were a community bank president, I would be looking very closely at how to get involved with that at those types of levels.”
Coleman says that for banks or credit unions considering outsourcing as an option, there are more than 100 providers of SBA lending services on the market, but only about a dozen companies offer a comprehensive solution and a team comparable to Phoenix.
He sees plenty of opportunity for such providers, simply by looking at the number of lenders that don’t do a lot of SBA loans.
Shockingly Enough:
Over two-thirds of the SBA lenders in the past fiscal year made fewer than 10 loans — which is the number needed to achieve scale.
In fiscal 2024, there were 1,453 SBA lenders, but only about 400 of them made the 10 or more loans needed to achieve critical mass, Coleman says. “You have 1,000 lenders who are making one or two or three loans a year, and those are the lenders that need this type of service.”
To support hiring a staff with expertise in government-guaranteed lending, Coleman estimates it would take an overall portfolio of $40 million in SBA loans.
See all of our latest business banking coverage.
Talent Is Key with Government-Guaranteed Lending
Jeremy Gilpin, the chairman of Community Bankshares, recruited Hurn and proposed the “lift out” of sorts to bring over the others from Fountainhead.
Gilpin — who has more than a decade of experience working in commercial lending for banks and credit unions — led a group of people who took a controlling stake in Community Bankshares in 2021, with the intention of doing government-guaranteed lending nationally.
“This was his vision,” Hurn says, noting that the asset size of the Community Bank & Trust unit was less than $100 million when Gilpin came on board.
Just as Community Bankshares added Hurn and his team to turbocharge its SBA lending, it also sought to bolster its USDA expertise.
The bank announced on January 28 that it had acquired Thomas USAF Group, one of the country’s largest USDA lenders. Thomas, based in Atlanta, will continue to operate independently, but as a unit of Community Bankshares, it will also be able to utilize Phoenix’s services.
The USDA program is smaller than the SBA program. For the 2025 fiscal year, it is authorized to provide guarantees on $2.3 billion of B&I loans.
