As a small business owner looking for the ideal small business loan for your needs, it can be beneficial to investigate all of the avenues through which you can acquire financing. With that in mind, you might want to learn more about the Community Reinvestment Act (CRA) and its provisions.
Keep in mind that as helpful as the CRA's regulations can be, they are far from the only consideration you need to take into account when looking for a working capital loan or other type of financing. The search for the right lender is rarely (if ever) easy, and you may need all the help you can get.
Background information on the Community Reinvestment Act
The CRA has been in existence since it was enacted by the U.S. Congress in 1977. Its stated intentions are to encourage depository institutions (banks, credit unions and other lenders) to serve the lending needs of their communities.
Due to this law's requirements, all financial institutions that provide business loans must regularly submit records that detail their lending history for a given period. This documentation is then evaluated by several federal agencies: the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS).
Ideally, these records should indicate that a given lender has done all that is necessary to equally serve the financing needs of all borrowers and their neighborhoods, including those with low or moderate incomes. The outcomes of CRA-mandated evaluations, along with other factors, are examined when banks apply for mergers, acquisitions and deposit facilities.
How the CRA can benefit your search for small business loans
Basically, if the agencies evaluating a bank or other lender's periodic record find that it hasn't appropriately served the lending needs of its community, it may be deemed ineligible to receive the aforementioned resources it applies for. Lender requirements vary by size – for example, small banks with assets less than $1.16 billion (as of January 1, 2012) aren't held to the same CRA reporting requirements as large banks.
You can look up lenders in your state and metropolitan area in the CRA evaluation records, kept by the Federal Financial Institutions Examination Council (FFIEC). This documentation will tell you about institutions that have (or haven't) met the requirements enforced by the federal departments that conduct these reviews.
Additionally, you might want to see if your region qualifies as a "distressed" or "underserved" area under the CRA's criteria – lenders in such areas may be judged more strictly if they don't lend according to CRA standards.
If you find that a lender hasn't met its CRA requirements during its most recent review, and you qualify for the loan you need in the first place, you may have a better chance at approval.