Stepping in When Banks Depart

local banking

Madison Capital Comes to the Rescue of Small Businesses in Rural Communities.

Tom Myers spends a lot of time talking to bankers. He was once one himself and knows the independent finance company that now employs him can fill important needs that banks can’t. “We do things that banks don’t,” says Myers, who is vice president of business development at Madison Capital. “We’re not as highly regulated as banks, and we don’t need to cross-sell lots of different products. We’re only interested in doing leases and loans for small to mid-size businesses.”

That’s good news for owners of these businesses, because banks are pulling out of small, rural towns and leaving companies in those locations without access to financing. A December 2017 article in The Wall Street Journal reported that more than 600 rural counties in the U.S. no longer have a locally owned bank, and that 35 counties no longer have a bank at all.

Banks and the services they offer are crucial to small-town America, but local banks in particular serve a unique role. By forging personal relationships with residents, community banks are better able to judge which borrowers are good risks. Larger banks, in contrast, typically rely on sophisticated algorithms that automate the decisioning process, especially for smaller leases and loans.

But federal regulations imposed after the Recession of 2008-2009 now limit the risks any bank can take when lending. These limits, along with costly new federal reporting requirements, have increased overhead and greatly changed the way banks operate. As a result, a bank’s cost to administer a $25,000 loan today is almost the same as the cost of administering a $500,000 loan. It’s one reason why large banks are buying up smaller ones, making the problem that much worse for small businesses in rural areas.

Financial institutions that are not banks, however, are not subject to federal banking regulations. “That’s why I tell bankers that when they run into deals that are too small for them, to call us,” says Myers. “Madison Capital partners with banks to provide equipment leases and loans when banks can’t do it.”

Myers tells of a recent example. “There was a construction company in Maryland, and the owner wanted to buy $50,000 used dump truck,” he says. “The owner went to his old-line bank to apply for financing and was told the bank couldn’t help him.” Fortunately, however, a loan officer at the bank knew Myers and called him. “We were able to finance the truck and do it in two days,” says Myers. “We made the owner of this business very happy, saved him a tremendous amount of time and got him back on the job quickly.”

Madison routinely finances equipment from $10,000 to $250,000, but will go as high as

$800,000. The company specializes in the retail, avionics, construction, and landscaping industries, among others. Customers purchase or lease a wide range of items, from vehicles, phone systems and computers to equipment used in construction, restaurants and avionics. “We also finance used equipment as well as new, because we deal with assets that come off lease and we understand their values,” says Myers. “Banks, on the other hand, usually finance only new equipment, if at all.”

Madison Capital also works with a wide range of credits. While banks usually work only with the best credits, Madison Capital regularly provides leases and loans for companies with B or C credit rankings and will also consider lending to D credits. “And our interest rates are reasonable,” says Myers. “Businesses with less than sterling credit can usually receive financing from us at rates ranging from 7 to 12 percent.”

Meanwhile, the shortage of bank services for small businesses continues—and so do Tom Myers’s conversations with bankers. “We’re much easier to work with than a bank, and we can do more to help customers who struggle,” he says. “We offer great service, competitive pricing, and financing for a wide variety of equipment types, and our customers say we’re responsive and keep our promises. We want to help as many small businesses as we can, so get in touch with us. We love to get things done.”