Merrill Lynch & Co., moving deeper into traditional bank terrain, on Thursday said it plans to commit $159 million in loans and outreach services for companies and individuals in Asian, Latino, and African-American areas in California.

The firm for years has courted small business customers, but the new initiative, an extension of a mid-1990s pilot program in Los Angeles and Orange counties, underscores Merrill's determination to capture traditional banking clients using its brand name as an adviser and broker.

"We hope to become the financial services firm of choice in these communities," said Pete Case, senior district vice president for Merrill's private client group in California and Arizona, which includes small-business advisory services and credit services. The firm has "thousands of financial consultants that can be pressed into service" to take part in a program like the one announced today, said Mr. Case.

Given Merrill's CRA-style program and its drive to market FDIC-insured deposits, among other recent initiatives, there is little left to distinguish the company from the nationwide banking companies with which it is competing more and more.

The lending program puts Merrill up against Wells Fargo & Co. and Bank of America, which were the two biggest providers of business loans under $1 million in California, according to June 1999 data provided by the Small Business Administration. American Express Co. has for years also targeted small businesses as customers.

Bank of America, which today announced the results of the first year of its nationwide $350 billion, 10-year community development program (see article on page 2), is also feverishly seeking to add to its 100-plus staff of small-business bankers to meet the growing demand for financing.

"We're in the process of expanding ourselves," said Don Pearson, Bank of America's small-business banking executive for Northern California. The bank's seen huge growth in small businesses in Oakland and Sacramento. But "one of the toughest parts is that we're all looking for talent."

The program, announced with the public advocacy group called The Greenlining Institute, includes a $120 million lending commitment to small businesses, $15 million to promote affordable housing credits, and $16 million to recruit and retain financial consultants to do outreach in minority areas. The New York-based brokerage and asset management firm will also allocate about $8 million for education programs and support for non-profits.

Advocacy groups say they hope that Merrill's commitment will encourage greater investment by Wall Street firms in poorer areas.

"This demonstrates to other investment houses that you can do business in emerging domestic markets," said Bob Gnaizda, Greenlining's general counsel and policy director. Firms like Goldman Sachs & Co. and Salomon Smith Barney could do the same, he said. There are currently 1 million minority-owned businesses in the state, and they are growing at a rate 2.5 times faster than white-owned businesses, said Mr. Gnaizda.

Merrill is aiming not to just finance small companies, but to work with them from start-up to the time the owner decides to exit the business, when Merrill consultants will be at hand with investment advice.

"It all comes back to wealth creation in these communities," Mr. Case said.

Thanks to California's fast-moving economy, which is particularly strong in the Bay Area, "banks are seeing more businesses in a good position than they used to," said Mark Quinn, district director for the Small Business Administration's San Francisco office.

The result is a motherlode of financing sources for small businesses in Northern California. "This is probably one of the best times for small businesses to have access to financing," Mr. Quinn said.

Although there's a significant distance between Merrill and the small-business activities of California's banks, community development groups that worked with the firm on its pilot lending program say it was quick to learn how to fit its business plans to new communities.

"Merrill set a precedent among lenders," said Lori Gay, president of Los Angeles Neighborhood Housing Services, a non-profit community development corporation that acted as a mortgage broker for some of the affordable housing loans committed by Merrill in Los Angeles.

Ms. Gay credits the institution with providing funding for additional outreach staff, allowing the non-profit to charge affordable fees, and most significantly, putting $250,000 up front for a multimedia advertising campaign.

"They wanted to become a household name," she said. Whereas the association might have made 5,000 contacts with possible first-time homebuyers in the community in one year by canvassing neighborhoods on foot, the ad campaign brought in 5,000 contacts in one day.

"I think it points to a general business interest," said Douglas Bystry, a board member of the nonprofit Affordable Housing Clearing House. "Merrill sees first-time homeowners as first-time clients."

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