March 7, 2007: Small Business Lending Below Par in Lower Income Neighborhoods

Not one of California’s 15 major business banks did a good job of lending to small businesses, making it difficult for these critical businesses to access capital and provide much needed goods, services and employment in lower income neighborhoods. The California Reinvestment Coalition (CRC) today released a report, Small Business Access to Bank Credit: the Little Engine that Could, which graded these 15 banks on whether they used community deposits to fully support local businesses, and if their lending to very small and minority-owned businesses responded to business credit needs in the lower income neighborhoods of six California counties.

The most significant findings are:
    * Citibank was the only bank that did a satisfactory job in all six California counties. It received a B- grade and did a particularly good job in Alameda County.
    * California’s largest bank, Bank of America offered the least access of any bank and received a failing grade for its small business lending.
    * Wells Fargo Bank received a C grade.  It lent more than its share of community deposits but was not good at lending to small businesses in California’s lower income neighborhoods.
    * In California’s largest city, Los Angeles, the state’s ninth largest bank, U.S. Bank got a perfect score in offering access to small businesses.
    * In contrast, the state’s tenth largest bank, City National Bank, received an F in its headquarters county of Los Angeles.

"This study highlights the institutional barriers that small and minority-owned businesses continue to face when trying to expand their businesses.  Since small businesses are the key to opportunity and hope in lower income communities, these barriers cut the heart out of the American ideal of equal opportunity," said CRC Executive Director Alan Fisher.  "This is a situation that must be remedied by major financial institutions, investigated by the U.S. Congress and scrutinized by the federal regulators who are responsible for overseeing these lenders."

The study looked at conventional small business lending in Alameda, Fresno, Los Angeles, Sacramento, San Diego and Santa Clara Counties.  Specific information by county on lending by each bank is available from CRC.