GPUAC, Area Banks and Community Partners Launch

Lending Program to Grow Small Businesses

Pilot  targets low/moderate income and predominantly minority census tracts

PHILADELPHIA, January 11, 2007-  Bankers and community leaders came together today to announce the launch of a jointly-created lending program for small businesses located in underserved Philadelphia neighborhoods. The “Philadelphia Business Builder Loan Program” was developed by the Small Business Lending Task Force of the Greater Philadelphia Urban Affairs Coalition (GPUAC) as a pilot lending initiative to increase the flow of capital to small businesses located in low- and moderate-income and /or predominately minority communities in the City of Philadelphia.  

The program provides a pathway for small businesses with higher credit risks to obtain bank financing; typically these requests are denied because of the high risk of loan defaults.  Loans can be used for working capital, inventory, equipment purchase or capital improvements.

“The goal of the Philadelphia Business Builder program is to address the gap between the readiness of borrowers to obtain bank loans and the willingness of banks to make loans to small businesses with lower credit scores,” said Sharmain Matlock-Turner, president, GPUAC. “I commend the five banks and our three community partners for their willingness to commit resources to small businesses and micro-enterprises which will help to promote economic development in underserved neighborhoods.” 

The five participating banks have committed a combined total of $18.25 million in loans over four years. Participating lenders are:  Beneficial Savings Bank, Citizens Bank, Commerce Bank, PNC Bank and United Bank of Philadelphia. 

Eligible small businesses are businesses with annual revenues of less than one million dollars located in low – and moderate- income census tracts or predominantly minority census tracts in the City of Philadelphia. The maximum loan amount is $50,000.

All applicants must receive pre-application Business Support Services. These include either credit counseling (provided by Consumer Credit Counseling Service of Delaware Valley) and/or business counseling (provided by either Philadelphia Development Partnership or Temple University Small Business Development Center).

The typical midrange of minimum credit score requirements for unsecured bank loans and

lines-of-credit is 660. 

“The Business Builder program opens the door to small businesses with credit scores between 630 and 660 to obtain loans from mainstream lenders. At the same time, it provides support services to help small businesses build capacity so that they can apply and qualify for the new loans,” said William A. Smith, co-chair, GPUAC Committee on Community and Economic Development, and senior vice-president of Citizens Bank of Pennsylvania.

Small businesses interested in applying for a Philadelphia Business Builder Loan should contact either a Participating Lender or a Business Support Services Provider. 

• Click here to download the application and lender or support services listing or call 215-851-1738. 

 

• Click here to view the fact sheet for more information.

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Lending data:

In the three years from 2002 to 2005, the number of small business loans in low/mod areas in the City

of Philadelphia increased by 147% from 2,243 to 5,536.  The dollar volume increased 91% from $107 million to $204 million.

In 2002, this represented 40% of all small business loans that were made in the City of Philadelphia. 

By 2005, this represented 54% of the number of all such loans made in Philadelphia and 52% of the dollar volume.

Source: CRA Disclosure Data from the Federal Financial Institutions Examination Council – FFIEC.

About the GPUAC Small Business Lending Task Force:

The GPUAC Small Business Lending Task Force issued a report in March 2004 which offered a series of recommendations designed to increase the flow of capital to small businesses in low- and moderate- income communities.  These recommendations fall into three Tiers.

For the Tier One initiative, which has been implemented, banks compared their small business lending policies to the most generous policies and programs (“best practices”) of their peers relating to underwriting loans to small businesses—for example FICO scores, minimum loan size, collateral required and length of time in business. Each bank then individually considered changes in its policies and practices to approximate these best practices.

Tier Two is the Philadelphia Business Builder Loan Program.  Participating banks agreed upon certain key underwriting standards that are more generous than are currently available in the market (similar to the approach of GPUAC’s successful Delaware Valley Mortgage Plan).  As a necessary prerequisite of more liberal underwriting, the banks require all applicants under the program to receive pre-application credit counseling or business support services from select community partners.

Tier Three is under consideration by the City of Philadelphia.  It is a loan guarantee program that would reach further into the underserved market by creating a loan loss guarantee fund.

About the Greater Philadelphia Urban Affairs Coalition (GPUAC):

Founded in 1969, GPUAC unites government, business, neighborhoods, and individual initiative to improve the quality of life in the region, build wealth in urban communities, and solve emerging issues.  Visit us on the web at gpuac.org

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