Banks of all sizes — from Bank of America to the $1 billion-asset Howard Bank near Baltimore — are investing in small-business loan funds to promote economic development while sharing risk.

The funds allow banks to avoid the risk of directly investing in small companies that might not yet meet the standards for traditional bank loans. Participation in such funds is also a way for commercial banks and thrifts to satisfy investment-test qualifications under the Community Reinvestment Act, industry experts say.

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