LV, B of A selected for small business program

Phil Levine

Thursday, Oct. 7, 1999 | 11:27 a.m.

Las Vegas is one of six cities chosen to participate in a new national loan program aimed at helping small businesses in need of capital.

The Community Express program is a collaborative effort developed by the Small Business Administration, National Community Reinvestment Coalition, the Bankers Community Collaborative Council and Nevada Fair Housing Center Inc.

In six select markets, the initiative will offer loans to small businesses that have had difficulty in accessing capital. A key component of the program is the technical assistance provided to small business owners; SBA officials say the technical aid is designed to enable small businesses to better access the financial avenues available to them.

The Nevada Fair Housing Center will serve as the program's technical assistance provider in Las Vegas; Bank of America was chosen as the preferred lender in Nevada. Other cities participating in the SBA's Community Express initiative are Boston, Chicago, Detroit, Hartford and Cleveland.

"This is a five-year pilot program, with the maximum amount per loan set at $250,000," said Bob Hart, Assistant Vice-President of Community Development at Bank of America. "However, there is no cap that I know of on the number of loans we can approve."

The SBA will guarantee up to 80 percent of each loan, 5 percentage points higher than its usual loan guaranty.

Gail Burks, who serves as both chief executive officer of the Nevada Fair Housing Center and chair of the National Community Reinvestment Coalition, said this program offers Nevada a "unique opportunity" to participate in the type of initiative that might otherwise bypass the state.

"One of the things I've found is that Nevada is often thought of as 'that state that's just a spot on the map,"' said Burks. "We believe it's important to be able to bring this type of program to our state. There are lots of small businesses here that don't meet the standardized criteria for loan approval, and a program such as this allows banks to consider other factors."

Nevada Fair Housing has put together a "tech team" to provide assistance for small businesses interested in applying for a loan. Included on that team will be the Las Vegas-based accounting firm Sanford & Co. and UNLV's extended studies office. Applicants will receive assistance in a wide range of areas, including maintaining financial statements and establishing a computerized accounting system.

B of A's Hart said Las Vegas' economic base made it a natural test market for the Community Express program.

"I think one of the main reasons Las Vegas was chosen to participate is our vast service sector," said Hart. "Those types of businesses are well-suited for a program like this. Under the program, the credit criteria for small business loans doesn't really change. But the technical assistance provided under this initiative will be very helpful for businesses looking to obtain loan approval. The fact is that many small businesses don't know how to package the (loan application) forms."

Hart said Bank of America is the largest SBA lender nationwide, having approved $9.7 billion in small business loans between July 1997 and June 1998. Still, B of A's involvement in Community Express may not be entirely altruistic. The bank's participation in the program will help it meet its community involvement requirements, as outlined by the federal Community Reinvestment Act.

Passed in 1977, the CRA encourages banks and thrifts to meet the financial needs of low and moderate-income neighborhoods in cities they conduct business. The CRA requires federal regulators to assess bank records, and determine if they are meeting those responsibilities. Though no formal punishment is handed out for non-compliance with CRA guidelines, banks looking to expand or merge their operations can meet federal roadblocks if they don't live up to CRA expectations.

During evaluations, banks are assigned one of five CRA assessments -- "outstanding, high satisfactory, low satisfactory, needs to improve and substantial non-compliance."

As a national bank, B of A falls under the jurisdiction of the Office of the Comptroller of the Currency. The most recent OCC evaluation of the bank's CRA efforts in Las Vegas -- conducted in the fall of 1997 prior to B of A's merger with NationsBank -- resulted in a mostly positive review.

B of A's Clark and Nye county operations were judged in three categories: lending, investment and service. The bank's CRA lending and investment activities were both rated as "low satisfactory;" CRA service received a "high satisfactory" rating. The OCC said the bank had "good levels of consumer lending widely distributed to borrowers of all income levels ... and good responsiveness to credit needs of small businesses. ..."

Still, the CRA evaluation noted some troubling patterns in B of A's local lending.

According to the OCC evaluation, "B of A made very few loans in low-income census tracts ... the bank's attraction of low-income borrowers does not compare favorably to the (area's) population demographics."

However, Bank of America officials say much has changed in the ensuing period since that evaluation.

"There definitely was room for improvement, but we've made a concerted effort through a number of special programs to increase our share of loans to low and middle-income customers," said B of A Vice President Joselyn Cousins. "It's been difficult to offer (mortgage) loans in lower-income areas as there's been limited development in those areas. But we've announced several programs, including those offering below-market interest rates, to increase our commitment to these areas.

"We're confident that the next CRA evaluation, which is due in the near future, will show much improved results."

Cousins points to B of A's involvement in Community Express as illustrative of the bank's commitment. And Jerry Stephens, deputy district director of Nevada's SBA office, said B of A was "actually the only bank to apply" to serve as the preferred lender for the Community Express program.

"There are other banks involved in different markets, such as Banc One, BankBoston, and Chase Manhattan," he said. "However, Bank of America was the sole bank to apply here in Nevada."

The SBA hopes to keep Community Express loan approval time limited to "no more than 36 hours," Stephens said. "We feel there is a need for this type of program, and although no specific dollar amount has been allocated, we are totally confident there's sufficient (SBA) funding available."

More information on the program is available from the Las Vegas SBA office at 388-6611.