SAN FRANCISCO - Thirty-two banks and three nonbanks are planning to launch a lending consortium today for needy small businesses.

It is billed as the largest and most ambitious effort of its kind.

The for-profit lending group, the California Economic Development Lending Initiative, is expected to have $5 million of capital and $50 million of low-cost lines of credit.

The consortium, which goes by the name Cedli, was said to have more money at its disposal than any other privately funded small-business lending consortium. Also, it was said to be the only one to operate throughout a state.

Furthermore, the group's ambition is to change the face of bank community reinvestment by becoming a model for efforts in other states.

"Most community lending is for fair housing," said George E. Williamson, a former banker who has been named president and chief executive of Cedli, which is based in Oakland. "Now we're increasing the focus on how important small-business lending is in this area," he said.

Included among the consortium's bank members are First Interstate Bank of California, Union Bank, Comerica Bank California, Northern Trust Bank, and Sanwa Bank California. The nonbank members are Oakland-based Kaiser Permanente, Pacific Bell, and Pacific Mutual Life Insurance Co., Newport Beach.

The consortium was organized by the Development Fund, an influential planning group based in San Francisco that is supported by foundations, including the Ford Foundation and the Rockefeller Foundation. The Federal Reserve Bank of San Francisco also played a crucial advisory and promotional role.

Cedli's plan is to make loans to small businesses that can't obtain sufficient financing from banks: enterprises that are likely to be owned by women or minorities or that are located in low-income areas. The group also plans to make loans to nonprofit community development groups.

Mr. Williamson said that research by the Development Fund indicated that many of the businesses in Cedli's target group have trouble getting loans. For example, many of the businesses can't get traditional bank loans because of previous credit problems, a lack of equity or collateral, or because they haven't been operating long enough.

Likewise, many small businesses find that the terms of government- sponsored loans, including those from the Small Business Administration, don't meet their needs. The government may require them to hire more people or to accept a term loan rather than a revolving line of credit.

Cedli plans to offer more flexible terms, including one-year revolving credits. In keeping with the partnership approach, Cedli members must find the small-business prospects and provide at least half of the financing themselves. Cedli will fund the rest, but its debt will be subordinate to the member's debt, meaning that in case of default, the member gets repaid first.

Cedli intends to participate in total loan packages of $100,000 to $250,000. This prompted some criticism from community development advocates, who said that businesses getting credits of this size normally have revenues of at least $1 million - hardly the profile of a disadvantaged operation.

"We're concerned that there is a floor on the lending," said Alan Fisher, executive director of the California Reinvestment Committee, a San Francisco-based, nonprofit consortium of community developers.

But Susan Phinney, acting executive director of the Development Fund, said that while there is a need for smaller loans, Cedli needs to focus on larger loans at first to make sure it can make a profit. Cedli's goal is to break even within three years. Once Cedli gets solidly established, Ms. Phinney added, it can start expanding the types of loans it makes.

The Development Fund has a track record of being able to replicate community lending efforts in other areas.

The group did the original planning work for California Community Reinvestment Corp., a 57-bank group that makes loans for affordable multifamily housing. The Development Fund's plan for the Reinvestment Corp. ended up becoming a blueprint for similar consortia in six other states. Likewise, just as it is doing with Cedli, the Federal Reserve Bank of San Francisco actively promoted Reinvestment Corp. to the banks it regulates.

Cedli has already had some defections. Namely, Wells Fargo and BankAmerica, which both had been intimately involved in organizing Cedli, later dropped out, figuring they could do better on their own.

Their departure cut the expected loan pool in half and led to Cedli being pitched as a model best suited to smaller banks. But organizers and participants said they were still optimistic that Cedli will be copied elsewhere.

"We're really hoping that Cedli will be a model for other banks in other states around the country," Ms. Phinney said.

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