ORLANDO—Plenty of new capital markets players are coming on the scene—and Fountainhead Commercial Capital is one of them. Fountainhead opened its doors in March and is the latest venture from highly regarded SBA lender Chris Hurn.

Hurn previously started Mercantile Commercial Capital, an SBA 504 loan lender that reached the Inc. 500 under his leadership. Mercantile was folded into Old Florida Bank, and Hurn exited last year. GlobeSt.com caught up with Hurn to talk about what is driving the SBA loan market today and the biggest geographic market and industry sectors in part one of this exclusive interview series.

GlobeSt.com: What is driving the SBA loan market today?

Hurn: Even though some real estate markets are red hot, we are still seeing reticence from many bankers to finance small business owners that want to expand.  Many lenders are flocking to the guarantees offered by the 7(a) program while smart small business owners are attracted to the below-market, long-term fixed interest rates and longer amortizations offered by the SBA 504 loan program—when they know about it. 

Traditional banks, which clamped down on their lending standards during the last downturn, have made it difficult for many entrepreneurs seeking financing to grow their businesses due to continued, substantial regulatory oversight. We, however, are gaining considerable traction in financing owner-occupied real estate with the 504 program. This loan program helps small business owners control their real estate expenses and grow their personal wealth.

GlobeSt.com: What are the biggest geographic markets?

Hurn: Geographically, California is very hot, perhaps even overheated from a commercial lending perspective, and there is less competition as you move toward the center of the country. We have found that many business owners in the Midwest are having issues getting financing because bankers there are being overly conservative, which is a shame for businesses in America's heartland.

GlobeSt.com: What are the biggest sectors?

Overall, bankers are continuing their love affair with physicians for conventional medical office loans, leaving many other sectors on the outside looking in.  We are also seeing hospitality as a growth sector for SBA lending, having financed a number of mid-tier flagged hotels ourselves in recent months. 

The entire travel and tourism sector is generally healthy but conventional lenders, due to regulatory scrutiny, have been steering clear, which gives us an advantage.  The irony here is that hospitality is one of the top ten best-performing NAICS code in the SBA's portfolio and has been so for many years.  This demonstrates the occasional disconnect between regulators and real-world data.