The Small Business Administration is testing a program meant to encourage more community banks and credit unions to make government-guaranteed loans in rural markets.
The Rural Lender Advantage program will be tested in six states: Colorado, Montana, South Dakota, North Dakota, Utah, and Wyoming.
The program features a streamlined application process for loans of $350,000 or less; a turnaround time of three to five days on routine loans; an 85% guarantee on loans of $150,000 or less; and specialized assistance for rural lenders on complex eligibility issues.
Borrowers can submit and complete applications online.
SBA Administrator Steven Preston unveiled the program Thursday at a news conference at the North Dakota State Capitol Building in Bismarck.
He said that his agency had formed an advisory team to find out why hundreds of small banks had stopped making SBA loans in recent years.
The team found that many small banks do not use the loan programs because they do not have the time, staff, or technical capabilities to comply with the agency's criteria, he said.
"America's heartland is essential to the nation's economy," Mr. Preston said. "Rural Lender Advantage is the result of listening to our friends in the rural business community and developing a service tailored to their needs."
The SBA said it expects to guarantee 3,000 to 4,000 loans under the program in the next year. If the test is successful, the program would be rolled out in other rural markets, Mr. Preston said.
Rural Lender Advantage is one of three SBA initiatives designed to spur economic development in what it called "underserved" markets.
The agency is teaming up with Operation Hope Inc. and other nonprofits on a program in which it will offer business advice and technical assistance to budding entrepreneurs in New York's Harlem neighborhood, and it has developed a program to stimulate growth of small businesses in some of the country's largest inner cities.
The SBA intends to launch both of those programs next month.
