At a glance
● Discover Bank met a critical need for favorably priced capital with better terms in Delaware while earning a market equivalent rate of return and CRA credit on the loan capital it provided
● $35 million deployed across 40 Delaware businesses over 8 years through a unique public-private collaboration
● Scalable model combines bank funding (75%) with local government capital (25%) to provide below-market long term fixed interest rates to small business owners, maximizing the economic development impact via job retention and creation.
Insight leads to innovation
Sometimes the best solutions come from someone who sees both sides of the equation. As both a CRA Officer at Discover Bank and a small business owner himself, Matthew Parks understood firsthand the challenges small businesses face in securing longer term fixed rate financing. Variable rates and shorter-term loans typically offered to small businesses create uncertainty that can limit a business’ willingness and ability to expand and grow.
Matt recognized that the SBA 7a guarantee program could, if priced appropriately, help small businesses secure appropriate financing with more favorable interest rates and terms. This approach would reduce risks for all parties involved: the business owner, the lender, and the SBA itself. This insight laid the foundation for an innovative partnership with Grow America that would transform small business lending in Delaware.
The opportunity
Traditionally focused on consumer banking and lending products, Discover Bank sought to provide value to small businesses as part of its commitment to supporting local economic growth and entrepreneurship for its Community Reinvestment Act (CRA) program.
Meanwhile, Delaware’s small businesses needed access to more affordable capital with longer terms. Traditional commercial loans that are typically available offer shorter repayment periods, placing a heavy burden on growing businesses. And, while SBA loans provided government guarantees, lenders rarely translated these guarantees into lower interest rates for borrowers.
The market lacked what businesses needed most: affordable loans with longer repayment terms.
Enter Grow America, with its extensive SBA lending expertise and strong community relationships. Together, Dan Marsh, Grow America’s CEO, and Matthew co-created a unique opportunity to bridge these gaps by creating a lending model that would benefit all parties involved.
The Grow America and Discover solution
● Discover Bank provides an attractively priced credit facility to Grow America to fund the SBA-guaranteed portion (75%) of the loans.
The partnership developed a groundbreaking financing structure that leverages the strengths of each participant:
● Local governments (including the City of Wilmington, Sussex County, Kent County, and New Castle County) as well as the State of Delaware and local foundations contributed 25% of the capital, incentivized by the opportunity to attract, grow and retain small businesses by providing favorable low-cost loans in their communities.
● Grow America serves as the primary lender, expertly originating loans and managing the portfolio and the relationship between all parties.
This arrangement allows for fixed-rate loans at below commercial rates and longer terms.
The genius of the model lies in its simplicity: Discover Bank funds the SBA-guaranteed portion of the loans, eliminating their credit risk while earning a reasonable rate of return and CRA credit. The local government participation helps extend the reach and impact of the program while keeping rates even lower for borrowers.
Results and impact
The numbers tell a compelling story—$35 million has been deployed to 40 Delaware-based businesses over eight years. But the real impact goes deeper than the statistics. The program created access to some of the most favorable financing terms available in the country. Business owners secured long-term, fixed-rate funding that allowed them to focus on growth rather than worry about possible future changes in loan terms and payments.
Looking ahead: A national model
What started as a Delaware success story is poised to expand significantly. For banks looking to enhance their impact in business lending and CRA performance, the Discover Bank partnership demonstrates a proven path forward. The blueprint is clear: banks can create impact and gain CRA credit while minimizing risk, communities access powerful economic development tools, and small businesses receive the affordable capital they need to grow. It’s a win-win-win scenario that could reshape small business lending across the country.
We thank the visionaries who brought this partnership to life: Matthew Parks at Discover Bank and the local government partners, foundations, and community partners who recognized the potential of this collaborative approach.