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The leading financial institutions are taking proactive steps to commit themselves to supporting small businesses. Goldman Sachs Group, Citigroup, and Bank of America are the frontrunners in this movement and have announced separate programs to attract SME entrepreneurs. The change comes in response to the Obama administration’s stress on banks to increase their lending to small businesses.
Community development financial institutions, CDFIs are funded largely by banks like Goldman Sachs and Citigroup. Goldman has decided to funnel $300 million and Citi has announced that they will provide $200 million to CDFIs. Citi’s initiative comes at a time when its loans to SMEs have dropped from $10.2 billion to $9.5 billion from last year. But Citigroup’s director commented that ‘this program does not intend to make up for the decline because it targets business owners that are outside the scope of Citi’s traditional lending reach.’ This current program is termed by Citi as ‘Communities at Work Fund’ and it will enable CDFIs to request for five year loans to lend to qualifying business firms. The program under Goldman Sachs is still in its pilot stage, but it is expected to reach out to 10,000 businesses in the next five years. Additionally, Goldman has committed itself to providing $200 million for educational programs and community colleges.
Bank of America has a more aggressive approach to increasing their small business lending. BofA promises to increase its funding to SMEs by $5 billion in 2010. Last year BofA lent $81.4 billion and by May of this year it already loaned out $19.4 billion. The bank will lend more than $22 billion in each of the next three quarters.
This article was submitted by Rohit Arora, co-founder of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to
info@biz2credit.com
