Bank of America Corp. will announce on Thursday the delivery of $10 million in grants for nonprofit organizations that lend to small and rural businesses. Bank officials believe these grants could lead to as much as $100 million in low-cost, long-term capital for nonprofits. As the activities of local lenders have been stymied due to recession-driven funding, this investment seems like a step in the right direction for small businesses across the U.S.
Known as Community Development Financial Institutions, or CDFIs, these nonprofit lenders have in the past received their funding from the federal government, but due to the harsh economic climate have been limited in their abilities to lend.
Other large banks are taking steps to create programs that would help small businesses as well. Wells Fargo & Co. is trying to find ways to approve loan applications from small businesses that were once rejected and J.P. Morgan Chase & Co. has initiated plans to offer business customers reduced interest rates for hiring workers.
Bank of America's Global Commercial Banking President David Darnell said in a statement reviewed by Dow Jones Newswires that "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."
At this point many small businesses are still considered serious lending risks and the hope is that if big banks reach deeper into the small business pool, they may find more businesses they wouldn't have otherwise lent to.