Magazine article American Banker

California Banks Creating Pool for Risky Small-Business Loans

Magazine article American Banker

California Banks Creating Pool for Risky Small-Business Loans

Article excerpt

With an eye toward helping high-risk small-business customers, a group of Southern California community banks is creating a loan pool.

Inland Empire Lenders Community Development Corp., with the backing of several Riverside County institutions, will begin distributing loans by August, according to Candace Hunter Wiest, group chairwoman and president of Inland Empire National Bank, a participant.

The development corporation follows similar efforts around the country, including the first of its kind, established in San Diego four years ago. As part of each program, banks receive credit under the Community Reinvestment Act.

"The goal of the program is to take customers who are nearly bankable, get them into the program, and then bring them up to bankable status," Ms. Wiest said. "These customers are nearly bankable, but not quite."

Michael A. Ocasio, executive director of the development corporation, said that although businesses owned by women and minorities will be the main target of the program, all small businesses are eligible.

"This is a throwback to banking's older days, when there used to be a thing called a character loan," he said.

Mr. Ocasio said the development corporation wants to begin with a loan pool of about $400,000 that would increase over time.

Although the corporation expects to offer loans of as much as $50,000, the average loan will likely range between $20,000 and 25,000. Ms. Wiest said 25 businesses are waiting to take advantage of the loans. …

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