Small Business Lending Program Creates and Saves 5,300 Jobs: FHLBank’s “Banking On Business” Program Celebrates 10th Anniversary

OLD FORGE, Pa.--(BUSINESS WIRE)--Congressman Paul E. Kanjorski (PA-11) marked the 10^th Anniversary of a small business lending program today by congratulating local lenders on their commitment to keep financing flowing to small and growing businesses, even in tough times.

“Local lenders remain the backbone of BOB”

Appearing at a machine shop in Old Forge, PA, Rep. Kanjorski lauded a group of community bankers for their participation in Banking On Business (BOB), an initiative that has provided $195 million in financing to 468 businesses across Delaware, Pennsylvania and West Virginia over the past ten years, creating or retaining 5,308 jobs.

Banking On Business, created as a jobs-building tool by the Federal Home Loan Bank of Pittsburgh (FHLBank) with the strong encouragement of the congressman, offers financing to both start-up and growing businesses whose cash flow or equity would otherwise prevent them from qualifying for credit. Working with 89 community banks in the three states, FHLBank has committed more than $42 million in BOB financing to the nearly 500 businesses, coupled with more than $152 million in loans from community banks. The combined $195.1 million in financing has created and preserved critical jobs during both good times and bad, including at Main Technologies outside Scranton, PA, the site of today’s event.

“I am delighted to honor the community lenders who have helped many small businesses to get off the ground, grow, and succeed,” said Congressman Kanjorski. “Since its inception, the Banking On Business initiative has, at no cost to taxpayers, created thousands of jobs in the region and assisted hundreds of small businesses to strengthen our local economy. I applaud the Federal Home Loan Bank of Pittsburgh and the many local lenders who have helped this program to succeed.”

How it works

FHLBank is a government-sponsored enterprise created by Congress that is regulated by the Federal Housing Finance Agency (FHFA). Its activities fall under the purview of the House Financial Services Committee and its Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises, chaired by Congressman Kanjorski. FHLBank uses private capital, not taxpayer dollars, to administer its programs.

Banking On Business offers recoverable assistance of up to $200,000 per recipient, to be leveraged with member financing to help small businesses that need it most. BOB funds are committed to individual businesses in competitive funding rounds. Funds may be applied to a building purchase, land acquisition, construction, expansion, permanent working capital or other uses.

Member institutions that participate in BOB agree to make a loan in combination with FHLBank’s recoverable assistance. The local lender must demonstrate that the loan would not have been made without BOB financing, and must also provide a loan of at least 40 percent of the total project cost. Businesses can receive only one BOB loan.

Repayment terms are flexible. There is no interest or principal repayment during the first year. Principal repayment at 3% begins in year two. Interest rises to 6% in year three and beyond.

“Local lenders remain the backbone of BOB,” said John Bendel, director of Community Investment at FHLBank. “It is the local lenders committed to their communities who continue to do the heavy lifting. We offer all of them our sincere thanks for a job well done.”

Next funding round opens shortly

For 2010, FHLBank has set aside a total of $3.5 million in BOB funding on a first-come, first-served basis. This year’s second funding round, to disburse at least $1.5 million, opens on September 1.

Small businesses across Delaware, Pennsylvania and West Virginia interested in BOB should contact FHLBank’s Bill Joseph at [phone].