The typical problem for a small, new business is that it can't borrow money because it is either too small or too new. Traditional lenders want to see either substantial assets or a solid profit history.

But in Minneapolis-St. Paul, a group of life insurance companies -- lenders as conservative as any in the financial industry -- propose to help finance such small companies through an institution called the Community Initiatives Consortium. The organization started last year with $1.2 million in insurance company funds to lend to small, local businesses that can't obtain other financing.

The 10 insurance companies involved freely admit that their motivation is to strengthen their image in the community. "The life insurance industry has a long history of community involvement," explains Steven Wishart, senior vice-president for investments of Northwestern National Life Insurance Co. of Minneapolis.

Northwestern, with more than $2 billion in assets, is among the largest of the insurance companies involved. Many of the others have assets only in the tens of millions of dollars. "This consortium makes it possible for them to participate in a community-benefit program that they wouldn't have the resources to do alone," Wishart says. The participants believe the consortium is the first of its kind in the country.

Whether the loans are made out of altruism or self-interest is irrelevant to 10 small companies -- including a Japanese restaurant, a data processing concern, and a bookbindery -- that have borrowed money from the consortium so far. Wishart says the loans, averaging about $100,000, are medium term. Most have been straight debt, both secured and unsecured. Interest rates have been "below market," although Wishart declines to provide specific figures.

At this point, the consortium has neither its own staff nor offices. Investment officers of the 10 insurance companies share the management responsibilities. For now, Wishart says, prospective customers are judged according to their ability to repay what they borrow and their potential contribution to the local economy. The insurance companies have pledged another $1.2 million to the consortium for its second fiscal year.