05/20/05 — Bankers discuss loan pool for small business

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Bankers discuss loan pool for small business

By Bonnie Edwards
Published in News on May 20, 2005 1:45 PM

MOUNT OLIVE -- Bankers in Mount Olive gathered Thursday to discuss the concept of a loan pool that would help businesses in small towns.

Banks would contribute money to get the pool started. They would profit from the interest the loans would generate. Businesses unable to obtain regular loans could use the pool to expand or make improvements.

Brad Frazier of the N.C. Bankers Association explained to the group how the loan pool would work. He has already helped develop plans for a similar program in Rocky Mount and said he hopes Mount Olive could become the second town in the state to adopt the idea. The two towns could become models for other towns' programs, he told the bankers gathered at Southern Bank.

Representatives from Southern Bank, Bank of America and Peoples National Bank were present at the meeting.

The Rocky Mount plan has taken nearly a year to develop, Frazier said. He said Mount Olive would benefit from Rocky Mount's experience, because many of the problems encountered in developing the loan pool there have been ironed out.

"I've already tripped over all the obstacles,"Frazier said.

He said Mount Olive could have the program in place as early as this summer.

Frazier said that the loan-pool program, if successful, would eventually become unnecessary as small businesses became able to turn to banks for traditional loans.

"Our goal is to have someone buy a building and upfit it for a business downstairs and split it up into several apartments upstairs," Frazier said. "The hope is as more people come in, it puts the loan pool out of business. If it's successful, it won't be here 15 years from now, because the market will pick up and the individual banks will continue."

Robert Shepherd, the senior vice president for Southern Bank, said he believes the loan pool would be a great boost to small towns such as Mount Olive. He expressed confidence that Mount Olive could have its loan-pool program in place within a few months.

Frazier said one thing he learned while developing the loan-pool program for Rocky Mount was to let a panel of bankers make the banking decisions involved.

"One of the pitfalls I encountered was trying to help them make decisions," he said.

Greg Eloshway, city executive for Southern Bank in Mount Olive, said Frazier's plan should work.

"This format is streamlined and well put together," he said.

Eloshway said a business owner in Mount Olive has already expressed interest in using the loan pool to refurbish his business and put in apartments and maybe even add another business upstairs.

"This is the direction we were wanting to go in," he said. "They'll do all the work, and we'll end up being a review board."

Eloshway also said he wants to make the loan pool available to other towns in his bank's market area, such as Seven Springs and Faison.

Shepherd said he hopes small towns all over North Carolina will have loan pools developed by next year.

"We're fortunate in Mount Olive to be one of the chosen two in the state for this pilot program," he said, "and we're fortunate to have Brad, because he's done extensive research into loan pools."