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November 11, 2024

Retired CT banking commissioner, former SBA chief and his deputy launch small business lender

HBJ PHOTO | MICHAEL PUFFER (From left) Former CT Banking Commissioner Howard Pitkin; Bernard Sweeney, retired CT SBA director; Julio Casiano, retired CT deputy SBA director; and retired banker Peter Melly have launched Capital Business Lenders, a new small business lender in Hartford.
By Michael Puffer
RELATED STORY: With new state incentive, second business industrial development corp. launches in New Haven
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Boosting small business lending to Connecticut’s Hispanic community was a top goal for Bernard Sweeney during his decade-long run leading the U.S. Small Business Administration’s Connecticut office.

It’s why Sweeney hired Julio Casiano — a bank executive with a track record of outreach to minority and underserved populations — into the agency in 2009, and eventually promoted him to be his top deputy.

Sweeney retired from the federal agency in early 2015. Casiano retired in October 2022, and almost immediately reunited with Sweeney to help launch Hartford-based Capital Business Lenders Inc., which aims to provide loans to underserved business owners in Connecticut’s urban centers.

Incorporated in late 2022, the startup received a lending license in June and got a critical boost last month when the state Bond Commission approved a $5 million grant to capitalize the institution.

Sweeney and Casiano, the two shareholders in the for-profit venture, hope to begin making loans — generally ranging from $5,000 to $200,000 — by early 2025.

Capital Business Lenders, Sweeney said, will accept loan applications from anyone, but focus its marketing on small enterprises owned by women, minorities, veterans and the disabled in Hartford, Bridgeport, Waterbury and other urban centers.

“It’s always been something that I’ve worked on in everything that I’ve ever done,” said Sweeney, Capital Business’ chief operating officer. “And this is just a continuation of what we did when we worked together at SBA. It’s a part of us trying to give back a little bit.”

Capital and counseling

Capital Business is what’s known as a business and industrial development corporation, or BIDCO, a type of lender that is not authorized to take deposits and can only make business loans.

The business model got a boost in Connecticut last year when state lawmakers passed legislation that allocated $15 million to BIDCOs in an effort to boost small business lending to underserved communities. The law allows for grants of up to $5 million per institution.

Capital Business Lenders was the first to get funding approval. It’s one of only two BIDCOs in Connecticut.

The other one — New Haven-based Better Local Capital — launched last December and got its lending license in September.

Better Local Capital is also looking to tap into the state grant funding, its CEO said.

Under 1993 state legislation governing BIDCOs, an institution must have a net worth of at least $2.5 million to be licensed. Capital Business Lenders got its start with a $2.5 million loan from Middletown-based Liberty Bank.

That capital was used to buy U.S. Treasury bonds. Interest from those bonds is being used to pay back Liberty over 10 years.

Casiano, who is president and CEO, said several banks were interested in investing in Capital Business Lenders. Doing so allows banks to meet their obligations under the federal Community Reinvestment Act.

Loans will provide working capital to small businesses. Casiano, 70, and his colleagues will also educate borrowers and provide business counseling, even after loans are repaid, he said.

“We have the knowledge to go in and help a company that’s struggling,” Casiano said. “So, part of our goal is that we will be providing to any applicant or any client that comes in through the door, free service from cradle to grave.”

Heavy hitters

Capital Business Lenders, which operates out of a leased 1,300-square-foot office in a New Park Avenue building, has assembled a small but seasoned team of banking experts.

Senior Lending Officer Peter J. Melly, 77, has about five decades of commercial lending experience. At Bank of Boston, Melly led a team that included Casiano and focused on connecting with underserved communities. That group stayed together through Fleet Bank’s purchase of Bank of Boston, then was dismantled more than a year after Fleet was purchased by Bank of America, Melly said.

After leaving Bank of America, Melly went to work for American Eagle Financial Credit Union, where he launched its commercial lending division and was promoted to vice president. He retired a decade ago, but still helps the credit union with special projects.

Former state Banking Commissioner Howard Pitkin chairs Capital Business Lenders’ Board of Directors. Pitkin, also 77, worked in the state’s banking department for nearly 40 years, and led it for 11 before retiring in 2015.

Any loan Capital Business Lenders makes above $200,000 will require board approval.

“I think if you look at the four of us, I don’t think you’re going to find anybody that’s got better experience,” said Sweeney, who is 74. “I mean, I headed SBA. Julio was a deputy, with 25 years in banking. Pete was a chief credit officer.”

Complementary service

Casiano said Capital Business aims to work in concert with Connecticut’s credit unions, banks and other small business lenders.

He anticipates the state’s $5 million will be entirely committed in three or four years, but the company plans to tap other federal funding sources to increase its lending capacity.

Capital Business hopes to eventually become certified to participate in the SBA’s 7(a) loan program, which guarantees 75% to 90% of a loan, up to $5 million, for qualifying small businesses unable to gain funds through non-government sources. These loans can be used for working capital, to refinance debt, acquire real estate or purchase machinery, among other purposes.

Casiano said these guaranteed loans could then be sold off to recapitalize Capital Business Lenders.

Catherine Marx

Catherine Marx, SBA’s current Connecticut director, said any BIDCO will have to build at least a year-long track record for review before qualifying for Small Business Administration programs.

“The state of Connecticut approved two BIDCOs to enter the lending arena for our underserved communities,” Marx said. “These entities will work alongside SBA’s nonprofit lenders, and we welcome their input. We look forward to seeing how they can be additive to the lending ecosystem.”

Not everyone was onboard last year in approving the $15 million in BIDCO grants.

Jeffrey Beckham, Gov. Ned Lamont’s budget director, in written testimony opposed the funding because he said it would spend capital funds on a “non-capital” program, and was “duplicative of services already provided by existing programs.”

John Carusone, president of the Bank Analysis Center in Hartford, noted that 18.7 million Americans, or 14.1% of U.S. households, are “underbanked,” despite the existence of more than 5,000 banking institutions nationally.

That indicates “there’s plenty of room for another participant to try and address the needs” of underserved populations, he said.

David P. Raccio, senior vice president of BDC Capital, a privately owned economic development lender focused on New England, said he believes Capital Business Lenders will help grow lending capacity for underserved populations.

Raccio said state taxpayers can be assured the public investment in the company will produce results, given the wealth of experience of its founders and staff.

“I definitely think they would be complementary because they have always been that way,” Raccio said. “Julio and Bernie are used to connecting resources. They are going to continue to put those pieces of the puzzle together."

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