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There are options for those with poor credit

Mississippi businesses and consumers who struggle to gain credit can turn to nearly a dozen lenders in the state that have received more than $250 million in low-cost capital from the Treasury Department under the Troubled Asset Relief Program, or TARP.

Mississippi’s financial institutions led the nation in total funding from TARP’s Community Development Capital Initiative, pulling in slightly more than one-quarter billion of the nearly $1 billion awarded nationwide. The banks and thrifts that receive the money must put a private match.

They can repay the Treasury at 2 percent interest over the next eight years, provided they allocate the funds within that time frame. After that, repayment goes up to 9 percent, an arrangement that the Treasury says will give the institutions incentive to spend the money.

What can they do with the money?

Anything that helps them provide financial services to low- and moderate-income neighborhoods. Jackson-based Hope Community Credit Union and Brandon’s Community Bank plan to leverage the money across a number of fronts but business and mortgage lending and banking services expansions will be priorities, they say.

“It’s helpful to have added capital to allow us to respond to some of the needs,” said Bill Bynum, president and CEO of Hope Community Credit, a subsidiary of the non-profit Enterprise Corporation of the Delta. Hope received $4.5 million.

“Demand for our lending has gone up every year since the recession,” he said.

Community Bank said the capital will enable it to expand at a much faster pace than would have otherwise been planned.

Community Bank, which received $54.6 million, has undergone a growth spurt in anticipation of the new capital, said Freddie Bagley, president and CEO of Community Bancshares, Community Bank parent.  “Community Bank has already implemented an aggressive plan for the program’s funds in the communities it serves,” he said in a press statement.

“For example, as housing and jobs are such critical needs in many Mississippi communities, Community Bank recently purchased a Flowood-based mortgage company to help expand its home-financing operation across the state. Community Bank has also sped up its bank office expansion plans by recently opening three new offices to increase bank access in existing markets where we operate.”

Bagley said the money will also help his bank initiate plans to expand on its top state ranking for Small Business Administration loans.

The banks that received the money have extensive experience serving the targeted market and easily met a federal requirement that 60 percent of loans and deposits must be derived from the underserved target market, said lawyer Ben Sones of Watkins Ludlam Winter & Stennis, a Jackson firm that helped with the application and approvals for 11 of the 12 Mississippi banks that received the money.

“That’s the biggest hurdle that’s already been satisfied,” he said, and attributed the large percentage of money awarded within Mississippi to its sizable number of people lacking access to financial services.

Since they were already serving the market, the banks said: “Why would we not do this?”

Craig Landrum, also a Watkins Ludlam Winter & Stennis attorney, said he expected many of the banks that applied would gain funding. But, “We were shocked at the amount of money we got for Mississippi.”

Banks, Landrum said, can pool their Community Development Capital Initiative capital to lend on larger business and project that generate economic activity. “The whole goal is to create jobs in these unserved markets,” he said.

Regulators will apply the same stringent valuation and risk rules to loans made with the Community Development Capital Initiative as they do to all loans, attorney Sones said.  But their extensive lending experience in the target markets should help them avoid excessively risk loans , he said.

Bynum, the Hope Credit CEO, said he expects to see continuation of the successful increased lending of the last few recession years. “The performance on these loans has been strong,” he said.

The key is to structure the financing to avoid putting too much stress on either the borrower or lender.

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