First Union National Bank, Georgia's fifth-largest bank, signed a partnership with a federal agency on Friday to promote lending to minority-owned businesses.
Under the partnership agreement, the first of its kind in the state, First Union will use the Minority Business Development Agency (MBDA) to publicize its loan opportunities and to encourage applications from the black business community, where bank officials say they grant relatively few loans.
Instead of setting aside a pool of money for minority business loans, as First Union and other banks have done for home-mortgage loans, the bank is focusing on helping minorities compete for loans, officials said Friday. They have assigned loan officers to work with MBDA-funded minority business development centers in Atlanta, Augusta, Columbus and Savannah, where applicants will receive technical assistance on applications for loans of $50,000 and more.
Carlton L. Eccles, the MBDA's regional director, predicted the partnership will become a model for the nation.
However, Sherman Golden, of Fulton County's Department of Economic Development and Planning, said that without more specific goals, the program could fail.
"You really cannot move an institution that historically has been averse to making those type of transactions forward unless you do set some goals. It doesn't mean that you have to set aside a chunk of money, but it does mean you have to set a percentage or a dollar amount to work toward."
Mr. Golden added that "It's a very good start because they're going to work through an existing black institution, they're not going to reinvent the wheel and they're not going to use their traditional marketing."
With some reservations, Atlantans who had testified before a fair lending panel last year about the need for more commercial loans for black businesses gave the partnership favorable reviews.
Milton White, the chairman of the board of Empire Investment Enterprises, a real estate investment and development firm in Southwest Atlanta, praised the move as a "first step," but added, "somebody's got to take the risk and provide the money."
Bank and MBDA officials said they will measure their success by any increase in black entrepreneurs' loan applications and approval rates. While declining to give any figures on their current loans to minority-owned businesses, First Union officials said that during the few months that they have worked informally with MBDA, they have seen improvements.
Charles Blackmon, the director of the Atlanta Minority Business Development Center, said the partnership will send a message to "mid- level loan officers who, if they don't have a valid policy from the top (telling them) to cooperate with these types of loans, are hesitant. Now, when we run into a problem we can go directly to a loan officer and iron it out because the officer knows the management is 100 percent behind them."
Benjamin P. Jenkins III, president of First Union, said the bank realized it was not serving the needs of the black business community during recent focus group interviews with 150 minority business owners throughout the state.
"It was pretty overwhelming that we were not doing as good a job as we could. . . . We were not seeing enough (lending) opportunities and we certainly weren't making enough loans," he said, adding that he hopes other banks will form similar partnerships. "We had a willingness and a real desire to make minority business loans and we have for a long, long time. But that desire wasn't translating into making loans."
Failures of small businesses in Georgia went up nearly seven percent in 1988, as compared to a six percent decline in business failures nationally and a one percent decline in the Southeast, according to Small Business Administration figures.
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