Magazine article American Banker

N.Y. Banks Start Fund for Minority Ventures

Magazine article American Banker

N.Y. Banks Start Fund for Minority Ventures

Article excerpt

Acting jointly to underscore their stated commitments to small business, the New York Clearing House Association and its 11 member banks have set up a $10 million venture capital fund. The clearing house said the organization, New York Community Investment Co., will serve companies in low-income and moderate-income areas of the city or those owned by minority or female entrepreneurs.

The clearing house banks are starting the fund with $10 million in equity and debt, giving it the capacity to issue $100 million. They said it will have the largest equity base of any U.S. multibank community development corporation funding small businesses.

"Banks came to the realization that there was a market out there they were not reaching," Jill M. Considine, president of the New York Clearing House Association and chairman of New York Community Investment Co., said last week.

The prime financing targets will be companies with insufficient equity or operating history to establish or expand lines of credit. Amounts to be provided range from $50,000 to $500,000.

Ms. Considine said candidates will include individuals or companies without credit histories, first-time borrowers, and family-owned businesses that need capital to expand.

The clearing house said about 70% of its financings will be equity or "near equity" investments, typically subordinated loans with equity features.

Funds will also be used for loans to not-for-profit intermediaries that, in turn, grant first-time credit in the form of mini-loans to emerging businesses.

A third outlet will be mortgages for small commercial properties in redevelopment areas, with both for-profit and not-for-profit developers. The community investment company is setting up offices at 120 Broadway in Manhattan. The member banks will provide services, including credit evaluations, legal support, and communications, to help reduce the small borrowers' financing costs. …

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