The Fauquier Bank joins forces with regional banks to support minority firms

Thanks to creative thinking among four community banks, minority businesses can now access interest-free loans to start or grow their companies.

The criteria for securing the money are straightforward. The firm must have a Minority Business Enterprise certification, have annual revenues that don’t exceed $1 million ($500,000 for farms), and be located in one of seven regional counties.

New businesses must exist for a least three months and existing businesses for more than two years.

Loan amounts are up to $50,000 for existing businesses and $10,000 for new ones.

For 119 years, The Fauquier Bank has served countless northern Piedmont businesses and residents’ banking needs. Last year, in a merger of equals, it joined forces with the Virginia National Bank of Charlottesville.

Today, it has six offices in Fauquier County and five in Prince William County, with 150 employees and $850 million in assets. By any measure, the organization exemplifies a successful community bank.

Leading the institution is an experienced banker in the person of Marc Bogan, President and CEO.

Bogan, 54, has been a banker for 30 years, the last five with The Fauquier Bank. His resume reflects time spent with large banks, like Legacy Wachovia and Bank of America, early in his career and progressively moving to several small community banks. In 2016, he took the reins of The Fauquier Bank.

“The diversity loan program is a four-bank collaboration,” said Bogan. “The Bank of Clarke County, the Bank of Charles Town, The Fauquier Bank, and First Bank in Strasburg and Winchester created and executed the concept. We call it ‘Banking on Diversity’”.

Like many recent creative business ideas, the loan program was an outgrowth of dealing with the pandemic in its early days. The banks initially huddled to work on safety and security issues of operating during Covid-19, the execution of the Paycheck Protection Program, and other financial needs.

“That early collaborative work morphed into a peer group of bank CEOs. We started to share ideas on things beyond the scope of Covid-19. One of those follow-on ideas was assisting the minority business community.”

Numerous studies have shown that minority small businesses do not have access to capital in a way a lot of non-minority business do. The interest-free loan program emerged as a way to address that shortcoming.

Moreover, the banking industry is charged by its regulators to invest in their local communities and specifically those with low to moderate incomes.

“The goal of the program is to provide capital for underserved minority and small businesses that need help building their businesses,” explained Bogan.

Often such businesses do not have traditional banking relationships. The ultimate goal is to grow their businesses, create jobs, and contribute to the broader community through increased commerce and taxes.

It is a pilot program, and adjustments will likely occur over time, including the terms. “We wanted to go to the market with an attractive program to get the attention of the targeted groups,” said Bogan.

What’s the incentive for the participating banks to make monies available interest-free?

Job creation and tax contributions are fundamental. Moreover, banks have a Federal mandate through the Community Reinvestment Act to provide capital through loans, investments, and services to low and moderate businesses and census tracts.

“We are not giving somebody money and hoping they’ll simply do something good with it. There is an expectation the loan will be repaid,” said Bogan.

The program was announced on February 9, in support of Black History Month. It has generated interest among the four sponsoring banks, but no loans have yet been extended.

“We are now in the question-and-answer phase as eligible businesses see if the program can be of value to them. One application has been received, and more are expected shortly.

“We are committed to making this offer available for one year. Each bank is contributing $250,000 for a total of $1 million. We are looking to place the money directly into the hands of small minority businesses,” Bogan said.

He goes on to underscore it’s not a large amount of money for the banks involved citing assets of $850 million for his institution alone. “But, it’s a lot money to these small businesses that are looking to grow and thrive.”

The Future
For those firms who apply and receive a loan, will the recovering local economy offer a hospitable environment for success?

“Everybody was concerned about the economy last year, even fearing a deep recession. Because of the Federal economic stimulus, I think the economy has stabilized. I also think Virginia and the Mid-Atlantic region are doing better than most areas.

“We made more money in 2020 than we have in any single year in the bank’s 119-year history. The indicators and metrics I see for 2021 are all very positive. The economy is not in a place where it was last year.”

For qualifying firms interested in learning more about Banking on Diversity, visit https://www.tfb.bank/Banking-on-Diversity.

 

Published in a February 2021 edition of the Fauquier Times.