A Big Fund to Aid Small Biz

Morgan Stanley is setting aside some of its arsenal of wealth to help small businesses get the cash infusion that so many of them desperately need. The bank is promising to make up to $500 million available to small businesses that are looking to use the investment to create new jobs.

"By extending financing for small businesses to invest and grow, Morgan Stanley is reaffirming our commitment to put our financial capabilities to work in the service of the economic development of communities," Ruth Porat, Morgan Stanley’s CFO said in a statement.

The thrift is partnering with national nonprofits and local community banks to help small businesses make better use of funds available through the Small Business Administration. The initiative, called the Morgan Stanley SBA 504 Program, is a collaboration between the bank, nonprofit Community Reinvestment Fund, and CDC Direct Capital, a certified development company that focuses on serving the financing needs of small businesses.

The Associated Press explains that the initiative will give smaller companies the credit they’ve needed since the recession hit, and will also be a way for banks to lend money and minimize risk. “By providing liquidity to community banks who lend to small businesses through the SBA 504 program, Morgan Stanley said it will enable participating financial institutions to limit credit exposure, reduce interest rate risk related to fixed-rate loans, retain more liquidity, and make more SBA first-mortgage loans. The idea is to help small-business owners obtain the long-term financing they need.”

Mike Mantle, a senior adviser at Morgan Stanley’s sustainable finance group tells Bloomberg Businessweek that “Small banks may be more willing to lend to businesses knowing Morgan Stanley is ready on the other end of the transaction to buy their loans. These loans have historically not been the types of assets that community and regional banks wanted to park on their balance sheets. To the extent that they have an option to sell them, that gives them the flexibility to increase their lending activity."

Get more business intelligence from Portfolio.com:

• Start It Up: Some of the 12 new businesses picked to be part of the inaugural incubation class of 500 Startups are built around some surprisingly simple ideas. Meet the new players.
• A Slice of Love: A plastic surgeon says forget about getting your loved one a designer bag or a diamond ring. The hot gift this Valentine's Day is a new body. But like most of Cupid's presents, this one is best handled with care.
• Lend, Borrow, or Steal: As Lindsay Lohan is accused of grand theft, sister jewelers Jodie and Danielle Snyder, of Dannijo, say they're not worried about doing business with celebs.