RLA Plans Inner-City Loan Fund : Rebuilding: The $5-million program will target small businesses that want to expand in poor areas of the city.

Rebuild L.A. plans to announce soon the creation of an independent $5-million loan fund to provide much-needed financing for small businesses in inner-city areas, RLA Co-Chairman Barry A. Sanders said Wednesday.

The RLA Community Lending program, to be financed by a federal housing grant and private donations, will be announced around the April 29 anniversary of last year’s riots. The program will accept applications from small businesses interested in expanding and creating new jobs in poor communities, Sanders said.

The program is the first major action by RLA to address its goal of stimulating the creation and expansion of small businesses in poor communities. Several other similar funds have also emerged since the riots.

The RLA fund is designed to fill a gap left by traditional financial institutions: loans between $25,000 and $250,000 in size, with flexible lending criteria.

“If a person has not been able to borrow from banks, that person . . . can borrow from this,” Sanders said. The fund will be operated as a nonprofit corporation independent of RLA. Rebuild L.A. itself will not accept loan inquiries.

Sanders said he hopes to raise the fund’s size to $20 million in the next few months, provided he can line up help from foundations and private donors.

Gilda Haas, founder of Communities for Accountable Reinvestment, a coalition of 25 organizations that fights redlining, applauded the announcement.

“This is the first small-business lending scheme I’ve heard from them,” she said. “The real proof will be whether people can access the loans, whether their lending criteria are different from other financial institutions.”

RLA has come under fire for doing little to revitalize these areas and for concentrating too much effort on seeking help from corporate benefactors outside affected communities.

But Sanders said a small-business fund was always part of RLA’s strategy and that the RLA Community Lending program has been in the works for nearly a year.

The fund will be joined eventually by similar RLA programs, including a small-business investment company and a business technical assistance center, Sanders said.

Most of the loans are expected to be in the $40,000 to $80,000 range-- too small to be profitable for most banks. The money will be lent at market rates.

In addition, lending criteria will be more relaxed in terms of collateral, credit checks and other standards.

“You won’t necessarily have to have three years of tax returns, but you will have to be credit-worthy on an objective standard,” Sanders said.

The fund will eschew loans to start-up companies and will not make “micro-loans”--loans smaller than $25,000.