The deregulation of U.S. financial markets and the recent wave of bank mergers across state lines have caused many small-business owners to fear the worst. The worry, of course, is that gray-suited bankers, now hundreds of miles away, will turn their backs on the borrowing needs of local small businesses and put their money elsewhere. But the boom in bank mergers may be the best thing that ever happened to small-business banking. In a growing number of bank acquisitions, The Community Reinvestment Act of 1977 (CRA) is being used to solidify the credit interests of smaller companies.

Community groups have used CRA for years as a lever to goad banks into making more loans to low- and moderateincome people, principally for home mortgages and improvements. Under the law, banks are responsible for serving the credit needs of the entire community, and the lending records of all banks and thrift institutions are reviewed periodically by the Federal Reserve Board, the Federal Deposit Insurance Corp., and other regulators. Regulators are obligated to take the records into account when reviewing merger applications.

Since mid-1985, when interstate banking began in many parts of the United States, CRA has played a bigger role than ever. And in most instances, one of the main areas local groups have rallied around has been small-business lending.

One of the earliest agreements along these lines was reached in the summer of 1985, when the Atlanta-based Citizens & Southern Corp. bought Landmark Bank Corp., of Fort Lauderdale, Fla. After a series of negotiations, a coalition of community groups, represented by Legal Services attorneys, persuaded the $11.5-billion acquiring bank to sign an agreement laying out the needs of low- to moderate-income groups and small businesses located in less prosperous parts of the state. While no specific investment program was prescribed, Greater Orlando Legal Services attorney Jay Rose says, "For the bank to perform [under the agreement], it has to make loans."

Since this agreement, approximately 20 others like it have been reached in such states as South Carolina, Massachusetts, Arizona, and Illinois. And the language in the more recent agreements has been more precise. Last September, for example, Barnett Banks of Florida Inc., which was buying two savings and loans in Jacksonville, told a coalition of community and business groups it would make at least $50 million in loans for low-income housing and to small and minority-owned businesses during the next year. For its part, Marshall & Ilsley Corp., a Milwaukee-based bankholding company that recently bought the Thunderbird Bank in Phoenix, has agreed to do a better job publicizing its various lending programs among Arizona small businesses.

As consolidation among financial institutions continues, some banking experts think small businesses may actually be among the biggest beneficiaries. "There's no question that banks are being encouraged to do things they probably wouldn't have done on their own," says James Carras, a consultant to banks and community groups all over the country. "As more and more mergers take place, bankers are being introduced to their local communities."