In less than 20 years, Hana Financial has grown from a small operation serving the niche factoring market in Southern California to a nationwide firm offering diversified financial services—a success founder and president Sunnie Kim attributes to keeping ahead of the trends. Keeping with this tradition, the firm’s latest endeavor has been a movement into mortgage banking. “We created one of our newer divisions, mortgage banking, in the midst of the housing-market crisis, but it was an ideal time to start because most lenders were reluctant to extend home-mortgage loans,” Kim says.
The Los Angeles-based firm’s original specialty was factoring, wherein it purchases other companies’ accounts receivables and takes responsibility for collection. Hana Financial purchases accounts for a discount, collects the money, then pays the client the net of the commission. It’s a niche that allows businesses to pass to a third party both accounts-receivables management and the risk that their customers won’t pay. “Factoring eliminates the need and cost for a permanent, skilled accounting staff, and our clients are insulated from the destructive impact of a financial difficulty suffered by a major customer, including bankruptcy,” explains Kim of the process.
Hana reached a factoring volume of $1.8 billion last year and is ranked one of the nation’s top-10 factoring companies. But despite the company’s clear success in this arena, Kim has looked to expand Hana Financial into other areas of finances. In 2007, Hana obtained its US Small Business Administration (SBA) lending license in order to broaden its financial services. A year later, the SBA extended Hana the coveted Preferred Lender Program (PLP) designation, which is offered to only the top SBA lenders. Last November, Hana’s PLP status was extended for another two years.
This benefits the company in a number of ways. Compared to traditional banks, which are regulated by state and federal agencies, Hana is subject only to the regulations set forth by the SBA. “As a commercial finance company, we have capital restraints, but with 75 percent of each loan guaranteed by the federal government, Hana can sell these loans on the open market at a premium, and turn over the funds every two weeks,” Kim explains. Getting an SBA-lending license required Hana to pay a premium, but the risk has paid off. Today, Hana is one of only 14 SBA licensees nationwide that is not a full depository financial institution. The company made more than $116 million in SBA loans in 2012, ranking 18th among 2,487 lenders nationwide.
Hana’s next move, into the mortgage-banking business, occurred in 2010. Starting the division then didn’t seem intuitive: Kim says the Los Angeles economy was the worst it had been since the Great Depression. “With Basel III and the Tier 1 capital rules making it much more expensive for banks to retain servicing, a scarcity of warehouse lenders, and newly implemented restrictions for companies trying to enter into the market, as well as some of the lowest mortgage rates in US history, there has never been a more opportune time to be an independent mortgage lender,” Kim says. “Historically low-interest rates have created more borrowers to refinance their existing loans, and … we are now ideally situated to capitalize on this upcoming trend.”
In 2012, Hana Financial made $160 million in loans, obtaining a warehouse line of credit from the banks. Kim expects that number to increase, as the company now makes $30 million in loans per month, a number that could easily rise to $75 million. With the company’s success in factoring and SBA lending, Kim saw an opportunity to bolster the mortgage division, opening four new branches last year.
In 2011, under Kim’s guidance, Hana again expanded its operations by offering credit insurance, which is different from factoring in that the company does not purchase a client’s accounts receivables; it simply insures them. “They don’t have to assign their receivables to us; they just pay us a credit-insurance premium to take on the risk, which we’re well positioned to do because we have a strong customer-credit-analysis infrastructure,” Kim says. “Many clients use a combination of our factoring and credit-insurance services.”