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CRENSHAW : State Loan Program Targets Small Firms

January 16, 1994|ERIN J. AUBRY

State Treasurer Kathleen Brown has announced the start of a state program designed to make more loans available to small, recession-battered businesses that are trying to expand and create jobs, particularly those in the inner city.

"We hear a lot of talk from Sacramento about rebuilding California's economy job by job," said Brown during Tuesday's news conference at Founders National Bank, "but those are just empty words unless we provide small businesses with the capital to make the investments they need to grow and hire new workers."

The initiative, the Capital Access Program, creates a form of loan insurance, allowing lenders to make loans to small businesses carrying higher-than-normal risks that they otherwise would not make. A pool consisting of premiums paid by the borrower and lender, as well as matching contributions by the state, will serve as a reserve fund to provide protection against potential defaults.

The state will draw on private funds from large companies that obtain financing through the California Pollution Control Financing Authority. The program will be administered by the authority, and reserve funds for loan insurance will be placed in its Small Business Assistance Fund. Any bank or savings and loan can participate.

Based on the $2 million in start-up funds, it's expected that about 800 loans averaging $50,000 will be made to small businesses this year.

The authority also provides an added incentive for lenders who do business in riot-affected or severely depressed areas: For each loan made, it will contribute 50% of the premium payments made by the borrower and the financial institution combined to the reserve account.

"It appears that the program will give us ability to access capital better than those that require a lot of equity," said Bill High, who owns First Defense Protection, a fire protection company in the Crenshaw area. "I'll be able to get the $30,000 for marketing and advertising I've needed for a while, but had to put on the back burner."

Founders National Bank President Carlton Jenkins said the program will ultimately help his institution assist businesses such as High's.

"Hard economic times have fallen even harder on communities such as ours," Jenkins said. "That means my business is riskier. But this program gives me a real financial comfort I didn't have before. It'll mean my bank can do more to help the community."

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