The Wall Street Journal
By: Darrell A. Hughes
October 6, 2010
Bank of America Corp. said Wednesday it has issued 40 grants totaling more than $3.7 million to nonprofit organizations that lend to small and rural businesses.
The funds are paving the way for Community Development Financial Institutions to access roughly $27.5 million in federal microloan programs and other lending capital from the U.S. Small Business Administration and U.S. Department of Agriculture.
"Helping strengthen small businesses and new start-up companies stimulates job creation and is critical to our nation's economic recovery," Bank of America's Global Commercial Banking President David Darnell said in a statement.
The financial giant announced plans in July to provide $10 million in grants to community lenders, which the bank said could unlock up to $100 million low-cost, long-term capital for small business microloans over the next year. Many of the organizations have faced funding restraints and regulatory barriers that have threatened their lending abilities.
But Mr. Darnell again reiterated that the smallest grant enables a nonprofit lender to leverage an average of 10 times that amount to lend to small businesses. That in turn "creates a ripple effect on job growth, spending and overall economic expansion," the executive said.
Bank of America's loan-loss reserve grants will be available through December 2011. The Community Development Financial Institutions, according to Bank Of America, expect to make 2,000 new microloans to small businesses and start-ups.
The average SBA microloan size is $13,000 per business; Bank of America estimates their grant initiative could help roughly 8,000 small and rural businesses.
According to Bank of America's preliminary data of its 40 grants: six nonprofit lenders in New York received $900,000 to leverage $5.5 million in federal microloans, nine entities in California was granted $790,000 to leverage $5.6 million, two organizations in Minnesota used $187,500 to leverage $1.25 million and two additional nonprofit lenders in Kentucky received $191,100 to leverage roughly $1.27 million in federal loans.
Gina Harman, president of Accion USA, says she welcomes Bank of America's initiative. Accion is an international economic development organization that assists people and businesses with lending tools.
The bank's efforts "to support SBA microlenders with this innovative and timely program are just what we need to extend our efforts to support the nation's smallest of businesses," Ms. Harman said.
Write to Darrell A. Hughes at email@example.com