SAN FRANCISCO ( TheStreet) -- It appears that Wells Fargo ( WFC) is once again well-positioned to take advantage of a federal economic-stimulus initiative -- this time in small-business lending -- as the banking industry navigates through the recovery.
Wells Fargo
Marc Bernstein oversees small-business lending at Wells Fargo

President Obama made small-business lending a focal point of his State of the Union address last week, and his administration has proposed funneling tens of billions of dollars into this key viaduct for economic growth. Much like Wells Fargo was a leader in the mortgage-modification effort last year, Wells is now at the forefront of the small-business lending push .

Wells Fargo has long been a dominant force in that area, one which is poised to become more profitable as the economic recovery takes shape. The San Francisco-based bank became the No. 1 small business lender in dollar terms last year, and No. 2 in loan volume, according to the Small Business Administration. Having extended $827 million in SBA loans, with 3% growth at legacy Wells Fargo, Wells says it is the only large, national lender to have increased SBA loan production last year.

The bank hired 1,300 bankers in 2009 to focus on small-business growth at both Wells Fargo- and Wachovia-branded locations across the country, and plans to add another 700 in 2010. It's part of a broader effort to grow lending to very small business customers by more than 20% this year. With over 2 million small-business customers, Wells is using its cross-selling prowess to offer additional products and services besides the loan, like retirement planning and financial advising.

Marc Bernstein, an executive vice president at Wells Fargo who oversees small-business lending at the company, spoke with last week about how his division fits into Wells' strategic plans.

Select Clips:

Clip 1: Wells Fargo Wants to Say 'Approved!'

Clip 2: Wells Fargo Determined to Beat Competitors

Clip 3: Wells Sees Lending As Win-Win Growth Strategy

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TheStreet: Can you give me some background on how you got involved in small-business lending, and the history at Wells Fargo?

Marc Bernstein: I've been involved with small-business lending for 21 years now. Back in 1990 or '89, Wells Fargo decided to bring a real focus to it, and we grew quickly. We really expanded the number of small businesses we had relationships with, and it's been an enormous success for the company. I think everyone here is very gratified by the opportunity to serve this part of the economy. And I'm not sure if it's clear in my biography, but I also work with banks around the world, including Saudi Arabia and Russia and Oman, to help banks improve and expand their small-business lending in other countries.

TheStreet: Can you explain a little bit about how small-business lending fits into the broader economy? Why is it important for recovery and growth?

Marc Bernstein: Well, small businesses account for approximately half the GDP of the United States, and the estimates are that they provide about two-thirds or more of the new job growth. New job creation comes from small businesses and of course that's especially important in the economic environment we're in now. So a healthy and vibrant small business sector is going to be essential if we're going to get new job growth. How do you identify a good borrower in this economic environment?

Marc Bernstein: Obviously, every business is unique and there are a lot of factors we have to take into consideration and try to balance to determine whether a small business is going to be able to repay the loan. Factors such as the amount of debt the business already has, the credit history of the owner and of the business, the amount of cash flow that the business and the owners have from all sources that will enable them to repay the loan. We also look at the prospects for the industry and what the local economic conditions are.

Bernstein continued: Obviously we here do small business loans for a living and we want to help small businesses get credit wherever we possibly can. And if an applicant is declined it will very often be reviewed by a second individual just to make sure that there is no way that we can say yes to that small business.

TheStreet: What's a typical borrower's size?

Marc Bernstein: We have in my business, which lends up to $100,000, we probably have several hundred thousand customers who have sales less than a quarter of a million dollars a year.

TheStreet: More broadly in Wells Fargo, how is small business fitting into the strategic plan to grow lending?

Marc Bernstein: As I think I said, Wells Fargo is committed to small business lending, and that's what I, and several thousand other people in this company are involved in.

We've been the No. 1 lender according to Community Reinvestment Act data for seven consecutive years. According to the latest CRA data, we're the largest in three separate categories -- loans under $100,000; loans under $100,000 in low- and moderate-income neighborhoods; total business lending under $1 million. This year we're also the largest SBA lender.

We're committed to growing our volume of new loans to very small businesses from roughly $13 billion last year to $16 billion this next year. That's contingent on the economy improving somewhat, but if the economy improves, we expect that there will be more demand from small businesses and we'll be able to approve a higher percentage of them.

TheStreet: How is Wells Fargo identifying these opportunities in this economic environment, and when competitors are pulling back a bit?

Marc Bernstein: Let me say that there is certainly one important element of Wells Fargo's business strategy that differentiates it from its competitors.

Bernstein continued: Wells Fargo has relationships with more than 2 million small businesses. And we are constantly looking for the opportunity to deepen our relationship with our customers. Cross-sell is very important to Wells Fargo. And where appropriate, credit can be an important part of a relationship with our customer. We feel that by deepening our relationship with our customer, we can better help that small business succeed, and we also develop a more loyal customer and a stronger relationship. Are you hiring or expanding? Especially with the Wachovia acquisition I'd imagine you have more locations and opportunities to lend to small businesses.

Marc Bernstein: We added 1,300 in 2009, and we're going to add 700 more this year. Those are the bankers in the stores who will actually work with small businesses as they come in looking for some business service. In terms of the cross-sell, let's say a borrower comes to their Wells Fargo representative with some financial issue they're having, are they offered other products as well?

Marc Bernstein: That might be part of it, but usually the banker will ask a number of questions and try to find a solution. If it's a problem that can be addressed with some bank product or service -- so for example, retirement planning. That's something that small businesses can often benefit by coming into their bank and talking with a banker and learning what kind of products and services are available.

And certainly, credit -- as I said earlier -- we want to approve as many small businesses as we can. That's what we do here. And so whatever we can do to educate small businesses, even as we're declining them, to help them have a better chance of getting credit in the future, that's certainly in the interest of the small business -- more likely to make them more successful -- and obviously the more loans we do, the more successful we are here.

-- Story was written, and interview was conducted and condensed, by Lauren Tara LaCapra in New York.

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