Bank of America’s (NYSE: BAC) Plan For $100 Million in New Small Business Lending

Bank of America Corp (NYSE: BAC) announced on Thursday that it would be providing $10 million worth of loan loss reserve grants to boost small business lending with a goal of creating $100 million in new low-cost, long term-capital for small businesses over the next 12 months.

The Charlotte-based bank will be providing $10 million in grants to non-profit 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. Microloans backed by the SBA and USDA provide small businesses with capital through local non-profit lenders.

To make use of the capital, non-profit lenders that participate in the federal loan programs must set aside loan loss reserves at levels of up to 15% of the capital provided by the agencies. Bank of America has said because of the recession, most local non-profit lenders have been unable to meet the reserve requirements making it difficult for small business owners to get 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.”

The announcement was made at the National Urban League’s centennial conference in Washington D.C. by Darnell on Thursday.

“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.”