The Small Business Administration today will announce a pilot program aimed at increasing lending in low- and moderate-income areas.
Under the five-year program, called Community Express, eight banks will be allowed to use streamlined procedures to make loans of up to $250,000 to small businesses in certain lower-income neighborhoods.
The SBA will guarantee 75% to 80% of the loans, considerably more than the 50% guarantee given in the agency's other express-lending program. The banks, which will fund technical assistance for each borrower, expect to begin making these loans next month.
Malcolm Bush, president of the nonprofit Woodstock Institute in Chicago, said the pilot plan should help target more SBA guarantees to poorer areas, strengthen fledgling businesses, and make it more likely that such borrowers will repay their loans.
"We think it is a great product," he said. "Banks and community groups are sometimes on opposite sides of the table on the Community Reinvestment Act, but they do have some interests in common."
The eight banking companies involved in the pilot are BankAmerica Corp., Bank One Corp., BankBoston Corp., Chase Manhattan Corp., European American Bank, Mellon Bank Corp., Wachovia Corp., and Wells Fargo & Co.
Each will choose several metropolitan areas in which to operate and will form relationships with nonprofit groups there. The banks will have exclusive lending rights in these areas.
- Scott Barancik