BofA Reels In Some Small Business Loans
January 4, 2012 by UPI - United Press International, Inc.
CHARLOTTE, N.C., Jan. 3 (UPI) — Bank of America confirmed it was calling in loans from an undisclosed number of small U.S. businesses.
Analysts said BofA was attempting to raise capital and impress regulators.
BofA spokesman Jefferson George said the number of loans affected would be a “very small percentage” of the 3.5 million small business lines of credit it has on its books, The Los Angeles Times reported Tuesday.
George did not give a precise number of loans the bank was calling in. The bank also said small businesses were given a year’s notice, although some business owners said they did not receive the initial warnings, the newspaper said.
Barak Zahabizadeh, who owns a messenger service in Burbank, Calif., said he did not receive the early warning and has now been told he has to repay $96,000 by Jan. 25.
He was offered new terms on the loan, one of which was a two-year contract at 12 percent interest. That would increase his payments to $4,500 per month, tenfold his current payments, he said.
“I told them if they apply too much pressure they’re going to push me into bankruptcy,” Zahabizadeh said.
“If small businesses are going to lead the way out of the economic doldrums we now face in this country, they must have access to capital, not only to hire more people but to protect the jobs they are currently providing,” said Scott Hauge, president of Small Business California.
Industry analyst Paul Miller at FBR Capital Markets said BofA was attempting to raise capital and prove to bank regulators that it was willing to reign in risks.
“Bank of America is under great pressure, especially with another round of (federal) bank stress tests coming up,” Miller said.
“As the regulators say: ‘We want you to tighten up.'” Miller said.