WASHINGTON--(BUSINESS WIRE)--Bank of America today announced it will provide $10 million in grants to nonprofit lenders, such as Community Development Financial Institutions (CDFIs), to leverage funds from the U.S. Small Business Administration (SBA) and the U.S. Department of Agriculture (USDA) for lending to small and rural businesses. The grants, for use as loan loss reserves, may unlock as much as $100 million in low-cost, long-term capital for small business microloans nationwide over the next 12 months.
SBA and USDA microloans are made through local nonprofit lenders, which also provide business training and technical assistance. To access the capital, nonprofit lenders participating in these federal loan programs must set aside loan loss reserves at levels of up to 15 percent of the capital provided by the agencies. However, due to the economic recession, most of these lenders have been unable to meet the reserve requirements, limiting their access to loan capital at a time when small businesses most need this support.
Bank of America’s new microloan reserve grants were created specifically to help CDFIs and other nonprofit lenders meet the required reserve levels, and thereby access millions of dollars in new low-cost capital.
“Helping strengthen small businesses and new start-up companies stimulates job creation and is critical to our nation’s economic recovery. Bank of America is empowering these entrepreneurs by directing private sector capital to unlock exponentially greater amounts of federal dollars for their businesses,” said David Darnell, president of Global Commercial Banking, Bank of America. “Even the smallest grant enables a CDFI to leverage as much as ten times that amount to lend to small businesses, which helps initiate a ripple effect impacting job growth, spending and overall economic expansion.”
Darnell made the announcement today at the National Urban League’s centennial conference in Washington D.C. According to the SBA, the country’s 30 million small and micro-businesses are the chief generator of new jobs, creating two out of every three new jobs across the country.
“The National Urban League commends Bank of America for the development of this innovative program,” said Marc H. Morial, president and chief executive officer, National Urban League. “Allowing CDFIs and other nonprofits – many of whom receive management and technical assistance through our Entrepreneurship Centers – to provide much-needed microloans to small and minority businesses nationwide will lead to increased business growth and job creation, which will boost the economy of our country.”
The average SBA microloan size is $13,000 per business. Through these programs, CDFIs can borrow for 10 to 20 years at rates less than two percent - twice as long and half the cost of other CDFI lending programs currently available. There are currently more than 175 nonprofit lenders participating in these programs.
Bank of America is the nation’s largest investor into CDFIs, with more than $1 billion in loans and investments to 120 CDFIs in 37 states. This work with CDFIs is part of the company’s broad support for small businesses, which includes a pledge to increase lending to small and medium-sized businesses by $5 billion in 2010. In the first half of 2010, Bank of America has provided $45.4 billion to small and medium-sized companies.
Bank of America also is increasing its spending with small, medium-sized and diverse businesses through a pledge to purchase $10 billion in products and services from those suppliers over the next five years. Other efforts to help small businesses include recent improvements to the bank’s 2 million small business credit card accounts, such as no rate increases on existing balances, and enhancements to the Advisor Alliance™ retirement plan platform, which serves more than 900,000 people from more than 40,000 businesses.
Bank of America
Bank of America is one of the world's largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 57 million consumer and small business relationships with 5,900 retail banking offices, more than 18,000 ATMs and award-winning online banking with 29 million active users. Bank of America is among the world's leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.