Big and small banks in West Virginia have kicked in $6.8 million to form a community development corporation that will make loans to start-up businesses.
The 54 banks hope to raise an $3.2 million more by the first of the year, which is when the development corporation wants to open for business.
"We feel that there is a total void ... for financing these new, small businesses," said Ronald L. Solomon, president of Wheeling-based First West Virginia Bancorp, a $115 million-asset company that is participating in the program. "We feel we are passing up some loans that should of have been made."
Other Participants
Mr. Solomon's First West is joined by banking companies that include Banc One West Virginia Corp., One Valley Bancorp, and Pocahontas Bancshares Corp.
In July, the state's bankers' association formed the West Virginia Bankers Association Community Development Corp., a private, for-profit corporation. The goal is to lend money to businesses that bankers ordinarily shy away from because of the risks involved.
It is also designed to spur West Virginia's lackluster economy. Unemployment in the state reached 10.6% in 1993 - the highest in the nation, according to DRI/McGraw Hill figures. And the state's per capita income in the fourth quarter of 1992 was $15,300, lower than every state but Mississippi.
CRA Credit
"I think banks feel like they need to step forward and help," said Thomas A. Winner, president and chief executive of the West Virginia Bankers Association.
The banks will also receive credit under the Community Reinvestment Act.
"It certainly has a bearing on it [the decision to participate]," Mr. Solomon said.
Although the lending program hasn't been fine-tuned, it will work something like this: A participating bank finds a start-up company it wants to lend to. It then brings a proposal to the development corporation's six-member board of bankers, which conducts a review. If the board likes the credit, the bank generating the loan books at least 50% of it. The remaining portion is farmed out to member banks.
"I don't know that we are restricting the program to any kind [of loan], just small businesses, those that are producing the jobs," Mr. Winner said.
Mr. Solomon said the program may be more beneficial to small banks than the bigger banks in the state.
