A bank or credit union that loans a big share of its money to local businesses could get a leg up on the competition the next time the city government selects a financial institution to provide banking services.
The Ashland City Council voted unanimously on Tuesday night to conduct a review of the city's criteria for selecting a financial institution for city banking needs.
Local residents bearing petition sheets with 300 signatures asked the city of Ashland to use a responsible local bank or credit union that makes loans to small businesses.
Lenders are willing to make loans, but they are facing regulatory hurdles, he said.
"Federal officials, with good intentions, are trying to make sure issues that happened because of the large players don't happen again," he said. "Regulators see risk in business loans. They want us to be very, very conservative. They want us to make loans to people who don't need the money."
Pelham said Rogue Federal Credit Union has still made $35 million in loans to small businesses.
He said there seems to be rising public awareness that small, locally owned credit unions and banks are willing to give businesses loans or refinance existing loans to provide a better deal.
All borrowers, whether they be businesses or consumers, are being more thoughtful and goal-oriented about their borrowing, Pelham said.
"There are better loan deals out there because people are really looking," he said. "They want to make sure they are borrowing appropriately."
Residents — including members of Occupy Ashland, Occupy Medford and Oregon Action — asked councilors to reconsider the city's use of Bank of America, which they said lags far behind when it comes to providing small business loans.
Ashland resident Andrew Seles said he has already moved the bulk of his money out of Bank of America, and he asked city officials to do the same with city of Ashland money.
He said Bank of America doesn't provide enough loans to small businesses, which either have to give up on their growth plans or turn to high interest credit cards.
Bank of America won a contract to provide banking services for the city of Ashland beginning in June 2009.
It beat out four other banks, including Umpqua Bank, on cost and quality of services.
When choosing a bank, the city of Ashland has no criteria for whether a bank makes a sufficient number of small business loans.
Bank of America Media Relations Manager Britney Sheehan said small businesses have a vital role in the state and national economies, and Bank of America is committed to helping them succeed.
She said the bank extended $168 million in credit to small businesses in Oregon in the first nine months of this year.
The bank loaned more to small businesses during the first three quarters of this year than it did during all of 2010, she said.
Bank of America is one of 13 banks that have pledged to the White House and the Small Business Administration to increase small business lending by $20 billion over the next three years, Sheehan said.
Bank of America generally defines businesses as small if they have $20 million or less in annual revenues, she said.
The bank also plans to hire 1,000 small business bankers nationwide by the middle of next year, she said.
Beyond lending, Bank of America has pledged to buy $10 billion in products and services from small, medium and diverse businesses over the next five years, and has already spent $4.1 billion on that effort, Sheehan said.
The bank has also given $4 million toward Oregon nonprofits in the past two years, including $35,000 for Ashland groups that include the Oregon Shakespeare Festival, she said.
"These nonprofits also serve as economic engines in your community by employing residents and generating revenue for the city," Sheehan said.
The city government has a three year contract with Bank of America for banking services, with options for two one-year extensions. The three year contract expires in a year and a half.
City Recorder and Treasurer Barbara Christensen said technology has changed, which could allow smaller, more localized banks to better compete in providing banking services.
Christensen said the amount of money the city of Ashland has with Bank of America varies each day, depending on what bills the city has to pay, such as its payroll expenses.
On Wednesday, for example, the city had about $325,000 deposited with the bank, she said.
"We don't keep any more money in that account than we have to," Christensen said.
In contrast, the city of Ashland has about $29 million invested with Oregon's Local Government Investment Pool, she said.
The pool is the best place to invest the city's money when it comes to safety, liquidity and return on investments, Christensen said.
The pool invests in a diversified portfolio, according to the Oregon State Treasury.
The city is investing excess cash that it has on hand, plus money for large infrastructure projects and other needs, Christensen said.
Local residents have urged city officials to invest more with local credit unions.
Changes in state law have made it possible for cities to invest public money in credit unions, they said.
Staff reporter Vickie Aldous can be reached at 541-479-8199 or firstname.lastname@example.org.