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ARC Releases Capital and Credit Report for Appalachia

May 2007


WASHINGTON, May 1, 2007—The Appalachian Regional Commission (ARC) announced this week the release of its report Access to Capital and Credit for Small Businesses in Appalachia, which was prepared for ARC by the National Community Reinvestment Coalition.

The study found significant credit gaps in portions of Appalachia but also reasons to be cautiously optimistic for stakeholders to work together to close credit gaps, including a favorable comparison between Appalachia and the nation on some indicators of lending. Appalachia has a lending infrastructure that includes about 227 banks and savings and loans institutions with more than $500 billion in assets. It also includes a sector of alternative lending institutions featuring over 100 community development financial institutions.

ARC Federal Co-Chair Anne B. Pope welcomed the report. "We hope that by providing an authoritative look at the credit landscape in the Region, it will help stakeholders work together to close the credit gaps that continue to exist and boost entrepreneurial activity," she said. "We know that capital is critical to this end, and we have acted accordingly. Since 1977, ARC has invested $37.6 million in 34 revolving loan funds that have generated $123 million in loans for small businesses. This funding has leveraged $8 in other investment for each ARC dollar, helping create more than 30,000 jobs."

The study also found that the Community Reinvestment Act (CRA) has had a significant impact in leveraging increases in community development lending and investing in the Appalachian Region. Banks and thrifts headquartered in Appalachia issued about $5.4 billion in lending and investing for affordable housing, small-business development, and economic revitalization during the 2003–2005 period examined. Mid-size community banks were particularly responsive to the needs of small businesses in lower income and distressed rural communities in Appalachia.

Despite signs of progress, significant disparities continue to exist in the Region in small-business lending, which is less accessible in non-metropolitan counties and counties experiencing economic distress. In addition, the smallest businesses with assets under $1 million and businesses in low-and moderate-income communities experience the least access to credit.

"The challenge for Appalachian stakeholders is to encourage all lending institutions to expand upon profitable lending opportunities and to further finance small business and economic development," Pope concluded.

The full report (PDF: 1.4 MB) is available on the ARC Web site.