Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Support for Small Businesses F.N.B. Will Provide Debt and Equity Financing Using SBA Funds to Owners Who Will Preserve and Grow Jobs

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Support for Small Businesses F.N.B. Will Provide Debt and Equity Financing Using SBA Funds to Owners Who Will Preserve and Grow Jobs

Article excerpt

A new $175 million fund whose backers include six regional banks is targeting small Western Pennsylvania businesses that have trouble getting financing from banks.

"We don't see the banks getting aggressive, and that gives us a great opportunity," said Stephen J. Gurgovits Jr., managing partner of F.N.B. Capital Partners. "Our average customer is going to be between $20 million and $40 million in revenue."

The group raised $60 million from investors and has obtained a license from the U.S. Small Business Administration to operate a small business investment company, or SBIC. Those raise their own capital and qualify for up to $2 in SBA funding for every dollar they raise. The SBA then loans the funds based on the 10-year U.S. Treasury rate, currently around 3 percent.

Traditional banks frequently are reluctant to finance small businesses unless they can offer real estate or other hard assets as collateral.

"Nobody has been there to support them from a capital perspective," said Mr. Gurgovits, who is the son of F.N.B. Corp. chairman Stephen J. Gurgovits.

Mercer County-based F.N.B., the region's third-largest retail bank, is one of the investors in the new venture, which is independent from the bank. The other bank investors include ESB Financial of Ellwood City; First Niagara; Farmers & Merchants Bank of Kittanning, Armstrong County; Farmers National Banc of Canfield, Ohio; and BankFirst of Orlando, Fla. A pension fund and high net- worth individuals also have invested in F.N.B. Capital Partners.

"We are very community oriented and this is just another way for us to meet the credit and financial needs of our communities," said Kristin Robertucci, Farmers & Merchants chief financial officer.

The younger Mr. Gurgovits previously ran F.N.B.'s merchant banking unit, which had invested more than $65 million since 2006. Because there were limits on how much financing the bank's commercial lending operation could provide, having a merchant bank enabled F.N.B. to keep customers who otherwise could have pursued financing from other sources.

But regulatory changes in the wake of the 2008 financial crisis affected that strategy. Among other things, regulators prohibited banks from sponsoring private equity funding or managing separate pools of investor funds to make equity investments in businesses. …

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