Matt and Megan McClain met while both of them were working at Sweet CeCe’s dessert outlet near Nashville a decade ago.

The couple went on to pursue other jobs in real estate and home building, but last year the couple decided to return to the bakery business and try opening a cookie shop on the North Shore of Chattanooga.

“A lot of people ask us why, and we always say “why not,”‘ Megan says. “It’s been a fun adventure.”

For all their eventual success — including plans to possibly open another local bakery — the McClains’ idea for their Chattanooga Cookie store almost never got off the ground. Conventional banks declined to finance the largely uncollaterialized equipment and while construction was underway on their store on Cherokee Boulevard, supply-side problems coming out of the pandemic pushed up construction costs.

For the McClains and a growing number of other entrepreneurs, the financing solution for their business venture came with Small Business Administration loans through Brightbridge Capital, a nonprofit lending agency that grew out of the Southeast Tennessee Development District.

Brightbridge Capital initially provided a loan of more than $150,000 for the McClain’s business, which they billed the Chattanooga Cookie Co. When construction costs proved more expensive than expected, the business owners went back to Brightbrige to secure another loan.

“Brightbridge not only provided us with our initial loan but were able to help us with a second loan when construction materials and costs went up more than we expected,” Megan says. “Brightbridge was a tremendous help to getting us going.”

Since its start in Chattanooga in 981, Brightbridge has grown to offer SBA and other loan options for startup and growing small businesses across Tennessee and North Alabama. In the past year, Brightbridge was the biggest nonprofit SBA lender in Tennessee, although others like Pathway Pending in Chattanooga and Three Roots Capital are also nonprofit SBA lenders in East Tennessee. Chattanooga-based BrightBridge Capital ranked in the top 5 of all banks in Tennessee for SBA loan volume with 16 loans totaling more than $10.1 million in the first nine months of fiscal 2023.

As interest rates rise and credit gets more difficult for many small businesses in an uncertain economy, bankers at Brightbridge say their role in filling in the financing gaps for new and expanding businesses is becoming even more critical.

“Banks are tightening up in this environment,” says Mike Matousek, senior loan officer at Brightbridge who joined the nonprofit lender two years ago after working in banking and number of businesses. “We’re filling that gap. Where banks might say ‘no’ to loan requests, we can often do what they can’t.”

As a nonprofit mission-driven lender, Brightbridge both partners with commercial banks and uses SBA loan funds to help provide loans and seed funds for small businesses to start and grow. It is a Community Development Financial Institution, a type of non-profit lender focused on providing financial services to economically disadvantaged individuals within communities.

Brightbridge has grown its loan portfolio to more than $300 million with investments and loans from its partner banks which gain community reinvestment credit and certain tax advantages with their support of Brightbridge. Brightbridge lends back to other businesses the proceeds from its loan portlio as loans are repaid, but Matousek said loan demand continues to exceed the resources available.

“There are more projects we could do than we have available funds,” Matousek says.

Many of the business loan requests pitched to Brightbridge are startup ventures without collateral for loan repayments and, in some instances, may need more planning and development assistance to get off the ground.

Paige McVity, a former banker who now works as an SBA loan officer for Brightbridge Capital, says Brightbridge and other startup assistance agencies work to help entrepreneurs with their projection modeling and business planning.

“We’re not a transactional business; we’re here to fill a mission and to be that gap filler to help businesses get started to create jobs and wealth in a community,” says McVity. “We can help provide that funding when conventional banks may not be able to for many startup businesses.”

SBA loans can be used for a variety of purposes including acquisition of equipment, working capital, debt refinancing, change of ownership and real estate purchases. Loan maturity typically ranges from five to 25 years.

Much of Brightbridge’s growth has come from SBA’s 7(a) community advantage loan program, which assists small businesses in under served markets). Only mission-based organizations like Brightbridge can offer the 7(a) program, which provides loans of up to $350,000 to help fill gaps in the marketplace from other types of loans and equity raises.

Brightbridge also participates in SBA’s 504(a) program, which allows for fixed-rate loans up to 25 years with a current rate around 7% for loans of up to $20 million when the SBA loan is put in conjunction with a bank loan. The SBA loans allow for longer term and lower rates for most borrowers.

McVity says about 70% of Brightbridge’s loans are for startup businesses in their first two years in business.

“We want to be a bridge to banking,” Matousek says. “If a conventional bank can’t do a loan for a startup (due to collateral or other bank regulatory requirements for such loans), we want to provide that loan. At some point when the business grows and is ready to graduate from our loan program, we send the right back to the bank that referred the business to us.”

BrightBridge President Bill Pollard says the lending agency is focused lifelong relationships with clients over the course of their loan.

“We have a proven track record that has been built on the trust of our funding partners as well as those we serve,” he says. “We’re excited to see the funding we’ve deployed making a difference for so many small businesses and disadvantaged communities.”

Biggest SBA lenders in Tennessee

1. The Huntington National Bank — $20.2 million from 59 loans

2. Newtek Small Business Finance, Inc. — $14.9 million from 26 loans

3. Live Oak Banking Company — $14.5 million from 13 loans

4. Regions Bank $10.2 million from 15 loans

5. Brightbridge, Inc. $10.1 million from 16 loans

6. Pinnacle Bank — $7.3 million from 14 loans

7. U.S. Bank, National Association — $7.2 million from 64 loans

8. Gbank — $6.9 million from two loans

9. Fifth Third Bank — $6.2 million from five loans

10. Bayfirst National Bank — $6.1 million from 40 loans

Source: U.S. Small Business Association for loans from Oct. 1, 2022 through June 30, 2023

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