Magazine article American Banker

ABA Sowing Seeds for Rural Development Loans

Magazine article American Banker

ABA Sowing Seeds for Rural Development Loans

Article excerpt

Michael Grove, president of a $20 million-asset Montana bank that is the only lender in a county with 2,500 residents, wants to do more to foster economic development, but lacks basic tools that are widely available to urban bankers.

"If these tools were available to our bank, we could do a better job for our community -- there's no doubt about it," he said.

With next year's farm bill on tap and a renewed focus on the economic health of the country's rural towns, more small-town bankers are calling for improvements in the way rural businesses and farms are financed.

The American Bankers Association task force on the issue recently issued a white paper calling for five improvements intended to generate discussions on the best ways for rural bankers to support economic development.

They include new sources of lendable funds, a secondary market for economic development loans, improved access to equity capital, and experts and tools to facilitate intergenerational transfers of existing businesses.

The ABA will use input generated from the task force to develop more detailed proposals for increased rural development lending, said Jeff Plagge, chairman of the trade group's agricultural bankers division.

He said the ideas will ultimately help the ABA formulate its position on the 1995 farm bill and other relate rural banking issues.

"If we don't deal with these issues in this paper, then we are ignoring the future of rural America," said Murray D. Lull, president of Smith County State Bank and Trust, Smith Center, Kan., who was on the task force of bankers and ABA staff members.

His $60 millions-asset bank. serves Smith County's 5,00 residents.

"There's a lot of life left in the rural areas," he said.

The trade group says rural bankers need funding sources sized to meet debt capital require- ments and match the maturities of economic development loans. …

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