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Small banks get U.S. funds to back business loans

August 3, 2011 |  2:31 pm

[This story updates a previous version with comment and a photo from Redwood Capital Bank and a link to a story on lawmakers approving the small-business lending fund.]

Some federal funds aimed at encouraging community banks to step up their lending to small businesses have started flowing from Washington.

U.S. Treasury building The U.S. Treasury said Wednesday that its Small Business Lending Fund would invest $7.3 million in Redwood Capital Bank, a community bank in Eureka, Calif.

The Treasury also said it would invest $12 million in Pacific Coast Bankers' Bank, a San Francisco specialty bank that supports community banks across the country by providing services such as cash management and processing of international payments.

Redwood Capital Bank Redwood Capital's president and chief executive, John Dalby, said the bank would use the Treasury funds "to expand our local investment in small business loans with the goal of continued growth for the economy of Humboldt County, California.”

The Small Business Lending Fund has $30 billion to buy preferred stock in banks with less than $10 billion in assets. The more the banks lend to businesses, the lower their dividend payments to Uncle Sam will drop.

In a victory for the Obama administration, Congress created the fund last September but probably would not do so today. The vote split along party lines, with Democrats prevailing. Republicans, who since have taken control of the House of Representatives, compared the program to the 2008 bank bailout that provided $700 billion to create the Troubled Asset Relief Program. 

There are 121 banks and savings associations based in Los Angeles, Orange, Riverside, San Bernardino and Ventura counties that have less than $10 billion in assets, according to the Federal Deposit Insurance Corp.

Some of the larger ones include Koreatown's Nara, Hanmi and Wilshire State banks, Community Bank of Pasadena and Citizens Business Bank of Ontario.


Small-business aid bill clears House, heads to Obama

Money flowing into California's small-business loan programs

Do your homework before applying for SBA loans

-- E. Scott Reckard

Photo 1: Funds are flowing to community banks from the U.S. Treasury, pictured here on a $10 bill. Credit: U.S. Secret Service 

Photo 2: Redwood Capital Bank. Credit: Redwood Capital