After enjoying a successful commercial banking relationship with VisionBank for more than a decade, Central Iowa entrepreneur Christina Moffatt has joined the bank’s staff to promote PurposeBank – VisionBank’s newly formed subsidiary focused on providing lending services to… small business owned by minorities and women.
Women- and minority-owned businesses are among the hardest hit by the economic turmoil caused by the pandemic, said Moffatt, who became PurposeBank’s first female employee as business development officer earlier this year. Moffatt is the founder of Crème Cupcake + Dessert in Des Moines, which she sold to Sammy Mila earlier this year, and was most recently director of small business resources at the Greater Des Moines Partnership before joining PurposeBank.
Complementing PurposeBank’s niche in lending to disadvantaged small businesses is a commitment to donate 10% of its profits to financial education and entrepreneurial nonprofits. The pay-it-forward approach is one that executives at Moffatt and VisionBank believe will resonate with many small business owners, both as borrowers and depositors.
“I don’t have a background in banking, but I do have an entrepreneurship background and I work with small businesses year after year to prepare them for the loan process and then keep them strong,” Moffatt said. “I feel like my entire career has brought me here to make a difference.”
To lead the lending team, Heather Miller, CEO of VisionBank, recruited Jenny Leonard, a veteran banker who has spent much of her career in commercial lending. Leonard has worked at all levels of the banking industry, including an international bank, a large state bank, a regional bank and a smaller community bank. While everyone had their philanthropic endeavors, none had the 10% set aside that PurposeBank instituted.
“Just like Heather, I can borrow anywhere,” Leonard said. “I can add to my books of accounts with all the great, established companies here in town. But to be able to do that with all the people I’ve been doing business with here in Des Moines for over a decade and to know that 10% will help others know what they don’t know makes me very excited.” She said.
“It’s purposeful banking, and it represents a conscious banking partner for all these well-established businesses and provides a resource for those who are often underserved [small businesses]. And what’s more exciting than anything, these big established companies, a lot of them started out just like these little guys. They were someone working in their garage, they were someone working in their basement. They were someone doing a side job or they were just full of guts and nobody taught them anything and they had to learn things the hard way without the resources to find out.
How does this levy differ from the requirements of the state community reinvestment law that all banks must meet?
Moffatt: This [10% contributions] is on top of that — so it’s actually a whole different level that we’re taking out, and we’re still going to get our community reinvestment funds [requirements].
[The Community Reinvestment Act, enacted in 1977, requires the Federal Reserve and other federal banking regulators to encourage financial institutions to help meet the credit needs of the communities in which they do business, including low- and moderate-income neighborhoods. Banks are evaluated using one of five evaluation methods tailored to a bank’s size or business strategy. The Federal Reserve makes banks’ performance evaluations public through an online database that can be searched using institution or exam criteria or by bank branch location.]
How is it decided how the 10% of net profit is used?
Leonard: These funds are determined by an external advisory board that we assemble. So it’s not only [the CEO] or employees of the bank who pick it. It is individuals representing a large, diverse group of businesses and non-profit organizations who know where these needs lie.
What is the relationship between PurposeBank and VisionBank?
Leonard: PurposeBank is a division of VisionBank. For each bank, you can view our financial data on the FDIC page. Of course, to hold ourselves accountable, we have our own ledger within VisionBank, just like any other branch or market. … So it’s going to be very transparent as to what that number is. We know each other what our strategic goals are to achieve this – we can’t just break even, or there’s nothing [from which] give 10%. So we know internally what numbers we need to hit and we hope to do that within a year.
Why this regulation instead of a new bank charter?
Leonard: Of course, to start a bank you would need a lot of capital and you would need to set up all your compliance and back office operations. Therefore, making it a division of an existing bank is more efficient and a better use of funds and resources. And that way the regulators could be happy with that too, since a new bank will get different guidelines for auditing as it should compared to an existing bank. We have a proven credit culture. we can use [VisionBank’s] credit team; We can use our team for credit operations. We can also use our retail [lending] Team, which is awesome for a small business owner. So there are branches all over Metro that can use PurposeBank.
Besides the 10% profit contributions, what else will make PurposeBank stand out?
Leonard: I don’t think other banks have the kind of management consultant Christina has.
Moffatt: For me I coach them and prepare them. That’s what I’ve done in the past – getting the entire business plan [elements] ready. This way I can actually scan her business plan for missing pieces before ever connecting her to Jenny. … Our goal isn’t just to make this loan — our goal is to actually grow these companies.
Would you say you bring a pretty good following of entrepreneurs?
Moffatt: Some long-time customers have deliberately moved their banking here without even starting, because they started small and want to be able to keep paying. … From my own experience, I remember what it was like going through the credit process. I’ve been turned down for credit multiple times so I know how this piece feels too. But I never knew why [I was turned down]. Even if we have to reject someone, we make sure they understand why. Maybe they need more security, they need more capital, they need more time, they need more coaching, or the business plan isn’t quite right.
As a division, how will PurposeBank impact VisionBank’s commercial lending business?
Moffatt: We still have commercial lenders on the VisionBank side and they still make loans. We’ve actually started pulling some of them over to our site to manage what we bring in. … We’re going through it with some of our commercial lenders. You still have your ledger [at VisionBank]. But if your customer said, “I want to send [the loan application] through PurposeBank,” our VisionBank lenders still maintain that relationship. You can just do it [the loan] under PurposeBank to give their customers that 10% upfront payment.