The less money you want, the harder it is to get a bank's attention. Now San Francisco's smallest businesses will get a break in the money hunt. Bank of America, the Southeast Asian Community Center, and the Small Business Administration are teaming up to offer $1 million in loans of less than $25,000 -- so-called micro-loans. The money will probably be available in September.

Who benefits? Mainly low- to middle-income entrepreneurs who can't get conventional funding, says Victor Hsi, the center's business director. Many clients are immigrants, though the program won't be limited to Southeast Asians, he stresses. To avoid confusion, it will be called the San Francisco Microloan Program and will have an office in the SBA's headquarters in downtown San Francisco.

Here's how it works. Southeast Asian Community Center, which has run microloan programs since the mid-'90s in the Bay Area, has gotten a $300,000 grant from Bank of America, which will be used as a loan-loss reserve fund and to fund new staff to administer the loan. Grant in hand, the Center applies to the SBA to make $1 million available to the center at preferential rates -- generally 4% to 4.5%. The center lends the money out at 11% for two to four years. That's not so far from conventional rates, but Hsi points out that the term is so short that most of each payment goes to principal. Hsi's organization has about 50 clients now and is eager to expand. Typical clients range from groceries to beauty salons to acupuncture offices, he says.

By Julia Lichtblau in New York
Julia_lichtblau@businessweek.com