Evening star., 1945-04-07
.RFC Make
Direct Loans
To ToLitt|eFirn1s
Agency Outlines
Two-FoId Plan to
Aid Small Business

Ey the Associated Press.
The Governments biggest
lending agency today uncorked
a share re-the-loan program for
little business.
The Reconstruction Finance Corp.
has quietly set in motion two-fold
operation which it believes will
provide small business firms with all
the postwar financial help they will
need.
The RFC outlined the plan as fol-
lows:
l. The agency will participate In
bank loans to industry whenever a
bank requests it. RFC will, in ef-
feet, guarantee up to rs per cent Of
the loan, and will actually put up
Is per cent of the money any time
the bank calls for it. The RFC par
ticipation occurs automatically on
request of the bank. The total
amount of the loan must be no more
than s250,00O.
2. If a business enterprise can't
get bank loan it may come to
RFC and, if considered deserving,
will be granted loan direct. Such
loans will include money to be used
as working capital.
Program Extended.
RFC announced recently it would
participate in loans made by credit
pools set up regionally by groups Of
banks. Now this program has been
extended to include loans made by
individual banks. The arrangement
goes further than RFC has gone be-
fore in loan-sharing and its pur-
pose. says the RFC, is Ito encour-
age maximum employment"
The RFC Board of Directors feels
that the program makes unneces-
sary the various proposals for post
war action by other Government
agencies to help finance small busi-
ness. This view is not shared by the
advocates of those plans.
I Two of the proposals are: For the
Federal Reserve Board to guarantee
private loans up to 80 per cent, and
for the Smaller War Plants Corp. to
firms. Both of those proposals are
before Congress.
Has Lending Authority.
RFC has one advantage: 1t doesn't
have to seek permission of Congress.
1t already has lending authority
also huge financial resources in the
form of revolving funds.
The five-man board has developed
its small business program during
a period when the RFC was the CEN
ter of swirling controversies involv-
ing Henry Wallace, Jesse Jones and
the agency's future role in en-
couraging maximum employment,
and a period when Federal loan ad-
ministrators came and went.
The board, which has kept func-
tioning under the supervision Of
both Jesse Jones and Fred Vinson-
and now will serve under still an
other loan ADMINISTRATORS COM
posed of Charles B. Henderson,
chairman: Sam H. Husbands, How
ard J. Klossner, Henry A. Mulligan
and Charles T. Fisher, jr. Mr.. Vim
sons successor has not been named
yet.
The RFC believes most individual
banks - especially the country
banks" which serve small enter
prises-will welcome the program
and use it.
How Plan Would Work.
Here's the way it could work for
an individual bank:
A business man comes in and
asks for a 100000 loan. The bank
looks over his prospects and believes
it would be willing to risk $4,000
but no more. 1t can grant the loan
of 100000 with the RFC taking the
risk on $1500OO of it.
The bank can't charge more than
per cent interest on the $50, 900
portion, nor more than per cent on
the $4,000.
A participation charge must be
paid by the bank to RFC. If RFC
participation is more than so per
cent of the loan, as in the forego-
ing case, the charge is three-fourths
of per cent. If participation is less
than so per cent, the charge Is one
half Of per cent.
At any time, the bank can ask
RFC to furnish in cash its portion Of
the loan-that is, the $15O,000. If
this is done, RFC instead of the
bank collects the interest on the