Last year, when Tom Kinder needed a $50,000 inventory loan for his $600,000 mail-order business in Sharon, Vt., he was surprised at how receptive Vermont National Bank was to his proposal. In the course of getting his loan, Kinder, co-owner of Pure Podunk, which sells bedding products, learned the bank's interest was more than coincidental. In fact, Vermont National had recently set up a special program to lend money to, among others, local small businesses.

Many banks are still reeling from the losses of the past couple of years and are trying to stay on the right side of the not-so-friendly bank examiners. But, prodded in part by the Community Reinvestment Act (CRA) and new amendments that strengthen it, a number of banks are slowly figuring out how to play bigger roles in the communities they serve. Vermont National, in Brattleboro, with a $65-million loan fund earmarked for small businesses, affordable housing, agriculture, and environmental and educational projects, has stuck its neck out much further than most institutions. Over the past three years, its "socially responsible banking fund" has made nearly 1,000 local loans. But elsewhere other banks are making significant, though less obvious, efforts of their own.

How do you find out if a bank is looking to lend to local small businesses and community-based projects? For starters, you can ask to see the CRA statement every bank must file annually. But since that document is usually too general, you may learn more by posing the following questions:

What programs, if any, has the bank initiated to support local businesses or community-development projects? Some banks, like Vermont National, have established special departments for handling relationships with community groups and other targeted areas of interest. "Ask about specific deals they've done," suggests David Berge, a Vermont National vice-president. If you fall within one of their areas of interest, you might qualify for favorable terms or rates.

What's the smallest business loan the bank is willing to consider? If the bank says it's looking to lend no less than, say, $100,000, that can be very telling. It means that small borrowers aren't really welcome. If, on the other hand, the bank says it's willing to look at $10,000 to $30,000 loans on a case-by-case basis, says Berge -- and not treat them as consumer loans -- that suggests a commitment to the community.

Is the bank able to provide any technical assistance to small-business customers? Most banks don't have the trained personnel to service every technical request that comes in. But a bank that is plugged into its community will know where to refer you. And if it doesn't? Well, that raises questions about the depth of the bank's interest.

-- Bruce G. Posner

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For more about how the Community Reinvestment Act operates, try these two sources: A Citizen's Guide to the CRA, which is available for free from Federal Reserve banks and FDIC regional offices in Chicago and other big cities; and the more lively Citizens' Action Guide on CRA, available for $20 from the Woodstock Institute (312-427-8070).

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