Bank of America ramps up small-business banking

Bank of America announced Thursday that it is launching a program in the Washington area to improve lending and services for small businesses. The move comes as the White House is calling on the nation's biggest banks to help shore up Main Street.

The program involves hiring 1,000 bankers over the next year to specialize in developing relationships and products for mom-and-pop shops, starting in Washington, Baltimore, Dallas and Los Angeles. The bank also said it is on track to "blow away" its goal of increasing lending to small businesses by $5 billion this year, a pledge it made last year after a meeting between the heads of large banks and President Obama.

"Anything that any of us can do to create more economic certainty should have a positive effect," Bank of America Chief Executive Brian Moynihan said in prepared remarks Thursday during a meeting with other business leaders in Boston.

The Obama administration has repeatedly called for extending aid to small businesses as a way to boost the economic recovery and reduce unemployment. According to the Small Business Administration, those firms account for half of private-sector jobs and drove 64 percent of employment growth over the past 15 years.

But many small businesses have been hamstrung by the tightening of credit in the wake of the financial crisis. Lending to small firms dropped 1.8 percent during the most recent quarter compared with a year ago, even as banks swung to a profit of $21.6 billion after losing $4.4 billion the previous year, according to the Federal Deposit Insurance Corp.

Congress has tried to address the issue and passed a bill last month - which has been signed into law - that aims to make it easier for small firms to access credit and includes incentives for hiring new workers. Other big banks have also pledged to increase their lending to mom-and-pop shops, including a boost of $4 billion by J.P. Morgan Chase.

Still, some small-business owners say that they have no need for credit or new employees while consumer demand remains sluggish. In addition, an SBA analysis this year found that about 40 percent of small businesses did not use credit from banks at all.

Bank of America said that its new program is not focused only on lending but includes helping businesses with accounting, cash management and even retirement planning. The bank has about 4 million small-business customers, about 12 percent of the market.

"You want to be the full suite," Joe Price, head of consumer banking at the company, said in an interview.

Price said that previously many small businesses fell between the cracks because the bank did not have employees dedicated to serving them. This program is part of the bank's strategy to increase revenue by expanding its products for existing customers, rather than seeking out new clients amid a stricter regulatory environment.

The goal of the new small-business bankers will be to help firms grow into larger companies - and loyal customers. The program is slated to expand nationally into select cities by 2012.

"There is more important work ahead if we are going to create conditions that will support stability and long-term global growth," Moynihan said.