UPS doesn't just want to race the truck. Through its subsidiary, Atlanta-based UPS Capital, it wants to lend small-business owners enough money to buy their own trucks. UPS Capital offers commercial loans, term loans, equipment loans and lines of credit to small and medium-sized businesses.
"Our UPS sales force is selling transportation and logistics solutions, and our sales force is selling financial services solutions," says Rich Bradshaw, senior vice president, global sales, UPS Capital (Atlanta). "By combining all three ... we bring [the customer] a business solution."
About 75 percent of UPS's customers are small businesses, providing UPS Capital with a built-in target market. "The major corporations have access to the capital markets that a small business does not," says Bradshaw. Small and medium-sized businesses "are traditionally underserved by the banking community," he adds.
The UPS sales force has been trained to refer customers to a designated contact at UPS Capital. From this referral channel, UPS Capital has acquired customers that run the gamut from manufacturers and distributors to restaurants, professional services firms and franchise operators. Accordingly, the broad scope provides a level of diversification beyond that typically available to a regionally focused lender.
Speed Is of the Essence
Just as in shipping, speed is important in lending. To that end, UPS Capital recently became a U.S. Small Business Administration (SBA) "preferred lender," which shortens the time it takes to approve SBA loans. As a preferred lender, UPS Capital can make underwriting decisions on behalf of the SBA.
To support that capability, the company recently signed an agreement with Fair Isaac (Minneapolis) to streamline the credit-decision process for loans under $500,000. "We're able to utilize credit scoring to move those through the process quicker and more efficiently," says Bradshaw. "It helps on smaller loans, to really determine in a quick fashion whether these are loans we should be doing or not." UPS Capital also uses TSoft small-business lending software from Bankers Systems (St. Cloud, Minn.).
Unlike regional or even super-regional banks, the company has the SBA preferred-lender designation across the country. "We're the only financial institution, to our knowledge, that has [the preferred-lender designation] in every SBA district in the 48 contiguous states," observes Bradshaw. That's a long way from when UPS first acquired a bank in February 2001. "Now our footprint is coast-to-coast," he adds.
Another differentiating factor between UPS Capital and a traditional lender is that most lenders have only limited insight into the inventory levels of a borrower. "On some of the cash-flow-related products like asset-based lines, both having control over the inventory and tracking the movement of the goods certainly gives us an advantage in the marketplace," says Bradshaw. "If the borrower is keeping their inventory in one of our supply-chain solution warehouses, we don't have to guess how much inventory they have, because it's in our warehouses," Bradshaw adds. "A bank gets reports on what their inventory levels are, but they don't really know other than the report."