York loan broker lures bank rejects

When banks stamp "no" on a business loan request, York native Todd Biltz is ready to say "yes."

Two years ago, Biltz founded Rapid Funding Inc., Springettsbury Township, a loan broker that turns up cash for companies and entrepreneurs turned down by batiks. The average loan is about $300,000.

Rapid Funding's source of capital is a network of investors willing to lend money to restaurants, gas stations and other relatively risky businesses. The company also lends to entrepreneurs with credit histories tarnished enough to deter banks but bright enough for Rapid Funding's investors.

Is the risk higher? "That would depend on who's looking," says Biltz, his smile revealing a salesperson's knowing optimism. "I guess that's in the eye of the beholder."

He describes Rapid Funding's loans as unconventional, or "nonconforming" to bank guidelines. They are typically more expensive than bank loans. The higher cost, Biltz says, is the price of Rapid Funding's skill in finding money.

Rapid Funding charges a fee of between 1 percent and 3 percent of a deal's value. The higher the value, the lower the fee. Interest is usually three to six percentage points above the prime rate, the interest rate that banks charge to their best customers, currently around 7 percent a year.

Commercial loan brokers are unregulated, says Mike Wishnow, a spokesman for the state Department of Banking. The loans are private contracts between two businesses, both of which are expected to protect their own interests.

Still, cheaper loans are, available, argues James Gibson, CEO of Pennsylvania Commerce Bancorp Inc., East Permsboro Township, and a potential competitor. Government lending programs, such as the U.S. Small Business Administration's, should satisfy borrowers who exceed a bank's appetite for risk.

'More flexible'

In Rapid Funding's offices in a strip mall off Interstate 83, empty cubicles await the company's anticipated growth.

Rapid Funding is two companies, a wholesale operation and a retail branch known as Rapid Funding-York. The latter makes loans throughout Central Pennsylvania and expects revenue of $250,000 this year. Loan volume hit $5 million in the third quarter of 2000.

Rapid Funding's wholesale arm processes loans for other brokers and hopes to spark a national expansion of the retail side through a version of franchising. The wholesale operation should have sales of more than $1 million this year, Biltz estimates.

The wholesale company is selling "net branches" to other brokers. The cost of starting a net branch is $5,995. The price covers training, support and marketing help.

The package, Biltz says, should appeal to residential mortgage brokers who are tired of their boom-or-bust business. Mortgage brokers do well when interest rates fall, but suffer as rates rise.

Agents Mortgage Co., a residential mortgage broker in Lebanon, has made commercial loans for nine years, says Barbara Mark, the company's manager. But the loans represent less than 5 percent of the company's portfolio.

Mark wants to expand that business, and Rapid Funding's branch notion intrigues her. But she's noncommittal. "With customers that we've served, they could get financing from a bank:' she says. "I would like to think our guidelines are a little more flexible."