We’re taking a deeper dive into the economic development hook, which is often an overlooked aspect of community development loans. However, it plays a crucial role in strengthening local economies. Here, you’ll learn how to identify community development loans that were originated for small businesses to support your portfolio.

Remember, when qualifying for a CD loan under the economic development hook, you’ll need to meet the size and purpose test. The criteria to meet the test are:

• The borrower must be considered a bona fide small business per Small Business Association (SBA) standards. You can view their standards here: U.S. Small Business Administration Table of Small Business Size Standards
• The borrower or purpose of the loan must also retain or create jobs for low or moderate-income individuals

Credit write ups don’t usually include salaries or job information, CRAs have to make their own assumptions. The CRA Q&A has tools and guidelines to help you make the best assumptions possible. Here, I include some examples of common small businesses that qualify under the economic development hook.

You can reference the Bureau of Labor Statistics to document information on representative jobs and income levels.

This publication is intended as a quick guide for identifying CRA loan data reporting categories. It is designed for bank CEOs, presidents, CRA and compliance officers, and others who have an interest in the CRA loan data collection process. Refer to Regulation BB, Regulation C, and the instructions for the preparation of the Consolidated Reports of Condition and Income for more detailed information.

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Linda Ezuka, LinkedIn https://www.linkedin.com/in/linda-ezuka-cra-today/

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