BofA Launches Programme to Spur up to US$100m in Small Business Lending
Bank of America (BofA) will provide US$10m in grants to non-profit lenders, such as community development financial institutions (CDFIs), to leverage funds from the US Small Business Administration (SBA) and the US Department of Agriculture (USDA) for lending to small and rural businesses. The grants, for use as loan loss reserves, may unlock as much as US$100m in low-cost, long-term capital for small business microloans nationwide over the next 12 months.
SBA and USDA microloans are made through local non-profit lenders, which also provide business training and technical assistance. To access the capital, non-profit lenders participating in these federal loan programmes must set aside loan loss reserves at levels of up to 15% 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.
BofA’s new microloan reserve grants were created specifically to help CDFIs and other non-profit 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, BofA. “Even the smallest grant enables a CDFI to leverage as much as 10 times that amount to lend to small businesses, which helps initiate a ripple effect impacting job growth, spending and overall economic expansion.”