Bank of America Corp. (BAC) spent $4.1 billion in 2010 toward its five-year commitment to increase spending on small, medium-sized and diverse businesses, the company reported on Monday. This phenomenal amount was expended in just the first year of BofA’s obligation.
In June 2010, BofA announced that it will increase its spending on small, medium-sized and diverse businesses. Initially the company pledged to buy $10 billion worth products and services from these companies over a period of five years, with a 5% increase in spending every year.
Small business owners were hit hard by the market turmoil. Feeding more businesses to these organizations is a key to perk up economic recovery as small and medium-sized businesses are the lifeblood of the economy. Also, BofA believes that assistance to these businesses will create more jobs in the sluggish economy.
The small, medium-sized and diverse businesses provide BofA with a broad range of valuable services and products, including cleaning, furniture, advertising, courier service, legal service, home inspections, maintenance, photography, security and software.
BofA’s support tosmall business has been lauded by the National Federation of Independent Business (NIFB). In recent surveys conducted by NIFB, it has established that biggest problem facing small organizations was the dearth of business. So initiatives of large financial institutes to create higher demand for these organizations’ products and services by spending more are crucial for the survival of these small businesses and job growth.
An increase in spending for these small businesses was required as these clients are reluctant to invest in their operations and hire until their sales increase.
BofA’sfive-year commitment is part of its broad support to these organizations. The company has provided more than $92 billion in loan to such organizations in 2010.
Further, on May 16, 2011, BofA launched three small business charge cards that will significantly help small businesses to control their payment and manage expenses. While small business owners will be able to manage their financial needs through these cards immediately, they will have to pay their bills in full every month.
Like credit cards, there will be no deferred of installment payment options. This will compel them to manage their expenses without any late payment and finance charge.
Walking along the same path with BofA, JPMorgan Chase (JPM) and Wells Fargo & Company (WFC) are also trying to accelerate economic recovery by lending to small businesses.
The shares of BofA retain a Zacks #4 Rank, which translates into a short-term Sell rating. Also, considering the company’s fundamental weakness, we have a long-term Underperform recommendation on the stock.
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