West Hollywood Has Big Hopes for Little Loans : Banking: Nine area banks have joined a city program to offer low-interest loans to fledgling businesses.

Nine West Hollywood-area banks have pledged to create a $135,000 fund this year to make small, low-interest commercial loans to fledgling West Hollywood businesses under the city’s new Micro-Loan Program.

Under the program, small-business loans of up to $10,000 will be made available to local businesses at prevailing commercial interest rates as part of an effort to recycle money back into the community. The banks have also agreed to reduce from three years to one the time a business must have operated to qualify for a loan.

“This is a financial service banks don’t normally do because they don’t make that much money on it,” said Deborah Potter, city coordinator for the program. The city asked the banks to take part in the program, and loans will be initiated through the Housing and Economic Development Division.

Traditionally, banks have found it unprofitable to offer low-interest, commercial loans of $10,000 or less, Potter said. “Business owners who want to borrow small amounts are usually required to pay an interest rate that is much higher, more like that charged for a credit card,” she said.

Each bank participating in the program pledged to make $15,000 in loans to be paid off in five years at an interest rate of about 13%. Participants include the Bank of Los Angeles, Wells Fargo, Bank of America, Mitsui Manufacturers Bank, Sanwa Bank, Sumitomo Bank, First Interstate Bank, City National Bank and Olympic National Bank.

Besides helping businesses, Potter said, the loan program is designed to help local financial institutions meet national lending requirements set by the Community Reinvestment Act of 1977. The law requires financial institutions to improve their lending records in the communities where they operate.

The loans will enable small businesses to modernize by purchasing new equipment, expanding, restocking inventories and even switching to different accounting procedures. “It is a citywide program that will be especially helpful on the city’s east end, where businesses have been struggling,” Potter said.

Paula Henderson, a regional vice president of the Bank of Los Angeles, said the program will help build a “working relationship with small businesses and help them to grow.”

Mark Lehman, president of the West Hollywood Chamber of Commerce, agreed. “It’s difficult for small businesses to get loans because most loans are geared towards larger businesses,” he said. “West Hollywood is a city of small businesses. This program is a harbinger of good things to come.”

Those seeking information about loans can call the city Housing and Economic Development Division at (213) 854-7468.