U.S. Bancorp is launching a lending program designed to make it easier for businesses owned by women, minorities and veterans to access credit.
The bank's first special-purpose credit program will allow for adjusted credit guidelines, which are expected to enable more business owners to qualify for a loan or a line of credit.
"You have greater flexibility on both cash flow and credit scores, and that allows you to reach more borrowers," said Sekou Kaalund, head of branch and small-business banking at U.S. Bank, a subsidiary of Minneapolis-based U.S. Bancorp.
Banks across the industry have
The programs were outlined in the Equal Credit Opportunity Act of 1974, but many lenders stayed away from them for decades out of concern that they could be accused of discrimination for favoring one racial group over another.
"You're seeing some lenders actually consider or implement programs that are truly special-purpose credit programs by using race and pointing to the economic gaps that exist, like the disparity in homeownership between Black people and whites and also Hispanic people and whites," said Richard J. Andreano Jr., a leader of the mortgage banking group at the law firm Ballard Spahr.
In 2022 alone, banks including JPMorgan Chase, Bank of America, Citigroup and Wells Fargo all said that they would develop or expand their version of a special-purpose credit program.
Businesses are eligible for the U.S. Bank program if their revenue is less than $25 million per year, and they are at least 51% owned or operated by women, minorities or veterans. Under the program, businesses with lower credit scores and lesser cash flows than the typical U.S. Bank customer will qualify for lending products of up to $2.5 million, the bank said.
The idea took hold after U.S. Bank
"This has a proven track record with Union Bank, and now with the U.S. Bank scale, we can truly take it across the country," Kaalund said.
Building on Union Bank's existing program was a "natural fit to continue as the two entities came together," said Lynn Heitman, the head of U.S. Bank's business banking segment.
U.S. Bank's consumer and business banking segment, which includes small businesses, had about $145 billion of loans on its balance sheet at the end of 2022, up from about $141 billion at the end of 2021.
