The city of Rancho Cordova has committed to bank with two locally based community banks in order to support local small business lending.
Rancho Cordova has put $5 million each into deposit accounts at Five Star Bank and American River Bank, as part of an initiative by Region Finance, a trade association operated by the Sacramento Region Business Association. The effort seeks to put municipal funds to work in the local business community, said Josh Wood, CEO of Sacramento Region Business Association.
“We are excited to partner with the City of Rancho Cordova in the RISE initiative and look forward to the economic development that will result from the City’s investment. We expect funds invested in RISE to enhance and serve Rancho Cordova in many ways, including job growth, housing, and services to local residents.”
– James Beckwith, President and CEO of Five Star Bank
In November, Elk Grove was the first local jurisdiction to commit to the Region Finance RISE initiative. RISE stands for Responsible Investment for a Stronger Economy. Elk Grove committed to put up to $15 million in deposits into River City Bank as a way to spur economic development. As part of the program, banks commit to loan at least 50 percent of the local deposit money to local businesses.
Local governments are not being asked to subsidize the banks or take risks, but to offer community banks the opportunity to compete for business, Wood said. By working with local banks, the various governmental jurisdictions could help build their local business communities because community banks are active lenders in the local economy.