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There’s a new “digital-first” bank in town that’s pledged to help provide the fuel to sustain small businesses.
Freshly chartered Locality Bank of Fort Lauderdale says it finished its first week in business Thursday with a long list of prospective clients who want to start an account or secure some financial help in the form of a business loan.
“We had hundreds of emails the first day where people were requesting to open accounts and requesting to do business with us,” said veteran banker and CEO Keith Costello. “It really was a pretty diverse group of small businesses, retail accounts, really across the board.”
First community bank in years
Locality is the first community bank to be formed in Broward County in 10 years. It applied in March, 2021 to the Federal Deposit Insurance Corp. for deposit insurance. The request was approved last November, the same month the bank received its charter from the state of Florida.
Since 2020, many South Florida small businesses, under duress from the COVID-19 pandemic, complained larger banks failed to serve them promptly, or at all, as they sought Payroll Protection Program loans that were underwritten by the Small Business Administration under the Coronavirus Aid, Relief, and Economic Security Act of 2020.
“The problem was, [businesses] were small and the amounts were not large enough for some institutions to do it in an economic way,” Costello said. “The larger banks had to focus on larger customers.”
Costello believes Locality, which raised $35 million from investors to start, holds an edge in the small business space with a customized technology platform built by Jacksonville-based Nymbus, which is designed to speed up the loan process. The company also is committed to helping existing small to midsize enterprises and entrepreneurs.
Serving Broward, Palm Beach and Miami-Dade counties, the bank’s digital services are available through a recently launched mobile application that allows customers to do business over their phones.
Services include commercial banking, commercial real estate lending for business owners and investors, SBA lending and deposit and business treasury services.
Locality though, came under criticism from a long-time South Florida banking analyst during its FDIC application process over a perception that it might not be serving the community’s small business and affordable housing needs as widely as it should.
Ken Thomas, a longtime industry analyst and president of Miami-based Community Development Fund Advisors, wrote that “it was possible” the bank would focus only on small businesses with gross annual revenues that exceed $1 million, not on “truly small businesses” that are in greater need of credit.
Thomas also raised questions as to whether Locality would involve itself in helping to finance the development of badly needed affordable housing in Broward.
“He does make a lot of good points; we talked about all of those things when we talked to the regulators,” Costello said Thursday,
He said he expected Locality’s technology would help cut the cost of making loans to smaller business operators, a group that the bank has always intended to help.
The tech behind the concept
Costello says the bank has lending software that can cut the time for a business to obtain a loan to a matter of hours or days as opposed to weeks or months. That includes a process that involves generating loan documents and conducting background checks. The bank has been granted a license to undertake SBA lending.
Costello said it’s a disservice “to put somebody through an ongoing process needlessly when you can take a quick look and you can say, ‘yeah, we can move ahead on this,’ or ‘no, we shouldn’t.’”
“A quick decision is better than no decision.” he said.
Surveys show there is no shortage of entrepreneurs who want to start a small business, despite the beating many existing proprietors have taken during the pandemic.
According to a recent national poll taken of 1,250 adults, the Seattle-based firm Digital.com, which provides online services to small business, found a substantial appetite among Americans for starting new enterprises. The findings include:
- 43% of Americans plan to start a business this year
- 55% of entrepreneurs will quit their current job within the next year
- One-third of 2022 startups come from first-time entrepreneurs
- Popular industries for new businesses include retail, business and finance, and computers and IT
- One in eight entrepreneurs have raised $100,000 or more for new ventures; while one out of 10 have invested more than $100,000 of their own money.
In Florida, 47% of those surveyed said they wanted to start a new business. Most had expectations of earning more money than they are now, while others wanted more flexible hours, had a desire to be their own boss or simply wanted to pursue a long-standing passion.
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“It doesn’t surprise me to hear the numbers,” Costello said.
Costello added that he expects younger entrepreneurs to be attracted by the bank’s technology. But at the same time, the bank isn’t turning its back on older depositors who prefer in-person retail banking.
“We ‘ve still got our brick and mortar,” he said. “We’re a hybrid for my age group who prefers to sit down with a banker the old fashion way.”
Costello said that the bank has activated a few accounts for employees, directors and insiders, to test out the new digital system. “We really expect over the next couple of weeks to allow people to come in on our app and on our website to open accounts and to apply for loans,” he noted.
The bank, which now employs 13 people, is working out of temporary headquarters at the General Provision shared workspace in downtown Fort Lauderdale.
Locality expects its permanent headquarters office to open at 1400 South Andrews Avenue in the middle of this year.