Frank Gallegos, executive director of Cen Cal Business Finance Group, has shepherded the organization through a growth spurt that expanded its loan portfolio to $232.6 million in 530 loans at the end of March. Photo by Frank Gallegos

As banks across the U.S. are consolidating and even expanding — with JP Morgan Chase and PNC Bank planning to add branches — one local business financing organization is also growing it footprint.

Fresno-based Cen Cal Business Finance Group merged with Coastal Business Finance in Santa Maria and acquired Bakersfield-based Mid State Development Corporation. Expanding into these new locations allows Cen Cal to give both communities a solid partner for the growth of their businesses using a Small Business Administration-guaranteed loan product.

As of Dec. 1, 2023, Mid State had a total of 191 loans for $71.3 million, and Cen Cal had a total of 336 loans for $160.7 million. As of March 30, Cen Cal’s combined loan portfolio had $232.6 million in loan balances and 530 loans.

“The experience that we have at Cen Cal is going to help both communities grow their businesses this year and in the decades to come,” said Cen Cal board president Tal Cloud. “It will be a great partnership, and we’re excited about what we can provide to those communities and help them grow their small businesses.”

The local team

Cen Cal Business Finance Group will be the surviving Certified Development Company (CDC) and maintain its headquarters in Fresno. Cen Cal’s Bakersfield office will be in the former Mid State Development office, and all employees from both organizations will remain.

In Bakersfield, they have added Lisa Carbajal as the senior loan officer and primary business development officer. Carbajal is a Bakersfield native with more than 25 years of banking and finance experience. Carbajal will represent Cen Cal in Kern County, southern Tulare County, the desert, and Northern Los Angeles County.

In the Santa Maria/Coast office, they have added Lesley Lang-Lopez as the senior loan and business development officer. Lang-Lopez is a Central Coast resident and a two-time Fresno State graduate. Lang-Lopez will represent San Luis Obispo, Santa Barbara, Monterey, Ventura counties, and coastal Los Angeles County.

“They’re going to have someone in their community lending money to the small businesses that are the heartbeat of any community in each of the counties and the surrounding counties of our two expansions,” said Cloud.

Opportunity knocks

Cen Cal Executive Director Frank Gallegos said both Bakersfield and Santa Maria executive directors were retiring. Finding people with the skill set that Cen Cal does with the credit side, as well as the sales and office management, was difficult. With the two gentlemen retiring, both companies did searches for six to nine months and couldn’t find candidates that they could afford. This allowed Cen Cal to expand and ask them to keep a local presence.

Cen Cal will take on the management and the administrative costs, benefiting from economies of scale and allowing these businesses to be managed by a company that already knows the market and the people.

Cen Cal had already been doing some lending on the coast—active in San Luis Obispo County for the last nine years. Knowing the market, lots of people from the Valley have second homes or second locations for their businesses on the coast.

In the Fresno Office, Cal Cain will continue as the senior loan and primary business development officer. Cain is a native of Fresno and a graduate of Fresno State with 35 years of banking and finance experience. He has been with Cen Cal for nearly 10 years and will continue representing them throughout the Valley from Visalia to Sacramento.

Three Mid State board members will be added to Cen Cal’s board of directors and a newly created non-voting Bakersfield advisory board to assist with community opportunities and awareness.

SBA 504 lender

Founded in 1984, Cen Cal partners with banks, private lenders, and credit unions to provide fixed-rate SBA 504 loans for owner-occupied real estate acquisitions and equipment purchases to small and medium-sized businesses throughout California’s Central Valley and Central California Coast.

Along with Mid State, the two organizations are longtime private nonprofits with a joint economic development mission in their respective communities. The U.S. Small Business Administration licenses both as community development corporations to deliver SBA 504 loan programs.

“As a recipient of a 504 loan myself, and many of us are on the board, we have gotten involved in the program because we’ve seen the benefit. It’s really exciting for me as board chairman to hopefully give other people that same opportunity that I’ve had,” said Cloud.

The merger of Mid State and Cen Cal will provide continuity for the SBA 504 loan program. It also ensures that local businesses will have ongoing direct access to a host of SBA programs through what will now be a regional CDC located within the community.

How it works

For Cen Cal SBA 504 loans, the partner bank provides 50% of the deal, and Cen Cal does 40%, with the borrower expected to put up the remainder. Cen Cal’s portion is fixed.

“So if you think of derivative financing, you’ll fix a portion allowed and you can have a portion of it variable so you get some security of knowing that you have a fixed payment on a portion of the loan,” said Gallegos.

The loans’ lifespans are 25 years — with Cen Cal’s fixed for the loan’s life, the bank’s portion can be variable, fixed, or similar variables.

Like an FHA loan for mortgages, first-time buyers usually have a smaller downpayment. They get an excellent blended rate, and fees may be a little higher, but like an FHA loan versus conventional, it’s still very affordable. A higher percentage of financing and a longer term equals a reasonable rate.

The majority of Cen Cal’s deals start with the bank. They let them know what they can do and what they’re looking for, and can deal with any bank in California. They primarily deal with banks that have offices in the Valley.

“We put a lot of work into keeping them informed as to what we can do, and our application is very similar to banks. A good half of them probably start with the bank and have them start with us in some way,” said Gallegos.

The organization’s roots in the Valley come with a robust broker network, including Economic Development Corporations around the Valley or other nonprofit economic development agencies. Gallegos said they get a lot of visits from brokers who know they can help them close their deals, especially on small and medium-sized businesses.

Current trends

Cen Cal also works with Access Plus Capital, other nonprofits, and credit unions to provide financing. Gallegos said credit unions are becoming more prominent players in business financing loans.

Typical projects can range from a $500,000 purchase to probably $4-5 million. Some projects are as high as $20 million, and Cen Cal’s portion can be as high as $5 million. The most common deal is about $1 million.

Cen Cal has new plans, including launching a microloan program that will extend support to segments of the community that are not presently being reached.

“The new loan fund will be a completely privately funded Revolving Loan Fund for existing Bakersfield small businesses. Loans will range from $10,000 to $25,000 and can be used for equipment, working capital, and inventory. We plan to hire local college interns to help work with clients to process the loans, and we hope to launch the program by year-end,” said Gallegos.