Program Encourages Bankers To Give Loans To Small And Mid Size Businesses

The governor has scratched the idea of a business loan pool, but state banks have committed to lending a total of $100 million to the state's small and mid-size employers as part of a program to help them ride out tougher economic times.

Under the program announced Friday, the state will take a bigger role in backing $40 million of those loans to further encourage bankers to keep credit flowing throughout the state.

The loan program is part of a five-point plan announced by Gov M. Jodi Rell earlier this month to get businesses the credit they need. Rell said Friday the commitment shows that local banks are ready to lend, even if there is a credit crunch nationally.

"Credit is the lifeblood of business," Rell said Friday. "It allows our small and medium-sized employers to buy inventory or raw materials, to expand or to make investments — and that creates all important jobs."

The $100 million includes $60 million in loans from banks in which the Connecticut Development Authority may provide a portion of the loan.

The remaining $40 million will be guaranteed by the development authority's URBANK program. Under the program announced Friday, the development authority will boost what it contributes to reserve funds at individual banks that cover defaults on loans made through URBANK.

Currently, the development authority contributes 3 to 5 percent of the loan total. That contribution will now double, rising to between 6 and 10 percent.

URBANK offers 30 percent loan guarantees on loans up to $350,000.

John J. Patrick Jr., chairman and chief executive of Farmington Savings Bank, said the added reserves will help make banks more comfortable in taking a second look at loans they might have not approved initially.

"It gives us more comfort," Patrick said.

http://www.courant.com/business/hc-loans1101.artnov01,0,5562529.story

Business Financial Services

Program Encourages Bankers To Give Loans To Small And Mid Size Businesses