#66: CRA Tips: Revisiting the Fundamentals: The Most Overlooked CD Hook

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.

CRA Today Website: https://cratoday.com/

CRA Hub: For more Community Reinvestment Act training resources, check out the Hub! https://cratoday.com/hub

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

Copyright © 2023 by CRA Today LLC(No claim to original U.S. government material)

All rights reserved. No part of this podcast may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This podcast is a periodic publication of CRA Today LLC and is intended to notify and inspire recipients of new developments in the Community Reinvestment Act. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.