Banks Band Together to Aid Riot Zone : Financing: Consortium creates a community development corporation to lend and invest in areas where others fear to tread.

Spurred in part by the Los Angeles riots, a consortium of California banks has created a $10-million community development corporation to lend money and invest in small businesses in riot-affected areas of the city, officials announced Friday.

The Southern California Business Development Corp. will pool the resources of several banks, savings and loans, corporations and others to create a fund that makes loans to entrepreneurs who have been unable to secure funding in the past.

Creation of the corporation--modeled on programs in San Diego and Oregon--would answer in part calls by community leaders and business owners for a source of ready capital to stimulate economic development in depressed inner-city areas.

The lack of such capital--and specifically conventional banks’ failure to make loans in the city’s core--has been blamed for the slow rate of business and job growth in those communities, which in turn has been cited as contributing to the spring unrest.

The goal of the new corporation is “to stimulate community development and job creation by making debt and equity investments in small businesses which have growth opportunities and do not qualify for conventional financing,” according to a mission statement.

The corporation is slated to open early next year at 4060 S. Figueroa St., site of a proposed community financial resource center. Loans will be made in amounts of $25,000 to $250,000 for terms ranging from two to five years.

About 45 banks attended a meeting Thursday at the Los Angeles office of the San Francisco Federal Reserve Bank to discuss forming the corporation. Banks that wish to take part in the program would need regulatory approval.

So far, about 16 California banks have expressed interest in participating, said Robert McNeely, senior vice president of Union Bank and chairman of the Los Angeles Community Reinvestment Committee, set up by the City Council in 1990 to explore economic development ideas in southern Los Angeles.

First Interstate Bank of California is the lead lender in the effort. That bank’s president and chief executive, Bruce Willison, will chair the corporation. The model program in Oregon was operated by First Interstate Bank of Oregon.

“The multi-bank community development corporation allows banks to do things specifically prohibited under their charters,” said Hugh Loftus, a member of the organizing committee and vice president at First Interstate California. “This allows us to make small business loans of a nature and to borrowers who would not qualify for traditional bank financing.”

The corporation will be run by a 15-member board, with designees from the banks and community groups. An advisory committee will be made up of representatives from several community economic development groups and the Rebuild L.A. organization.

The organizing committee includes representatives of First Interstate Bank, Federal Reserve Bank of San Francisco, Founders National Bank, Bank of America, Bank Audi California and Dai-Ichi Kangyo Bank of California.