CHICAGO (TheStreet) -- Citigroup (C), JPMorgan (JPM) and Goldman Sachs (GS) have trumpeted increases in small-business lending. But will it make a big enough difference?

Citigroup this week announced an initiative targeted at small businesses in economically depressed areas. The company pledged almost $200 million to fund below-market-rate loans for qualified businesses, in partnership with the Calvert Foundation, which invests in financially underserved communities, and Opportunity Financial Network, an organization that brings together 170 leading community development financial institutions (CFDIs).
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"It's an important initiative at a critical time," says Mark Pinsky, Opportunity Financial Network's president and chief executive officer. "Unfortunately, lending to distressed communities is one of the fastest-growing economic opportunities."

His network's members have seen loan applications grow an average of 50% for each of the past six quarters. "As other credit sources have diminished, the demand for what we're doing has grown enormously," Pinsky says. Businesses that once might have qualified for standard bank loans are now considered high-risk and have to seek alternative financing.

Lenders with experience in economically depressed areas have been relatively effective in navigating the current crisis. "We've been lending throughout the recession," Pinsky says. "We've seen an increase in charge-offs in CDFI loan funds, but it's been manageable throughout. We were prepared for much worse."

Loans funded by CFDIs had an overall charge-off rate (actual loan losses) of about 1% in 2008 and 2009, lower than that of FDIC-insured institutions.

Investing in small-scale, community-oriented projects can be a win-win for large banks: They get good PR for helping out economically devastated areas, while also making an investment they expect to pay off financially.

Wells Fargo ( WFC) recently announced a $1 million investment in Grameen America, the U.S. offshoot of the microfinance institution whose founder, Muhammad Yunus, won the Nobel Prize for his work. The money will be used to launch a new branch in San Francisco.

Investing in microfinance and community-development funds is a positive step. But are large institutions doing anything to help the average Main Street business, one in a town that's been shaken by the recession but doesn't qualify as "distressed"?

Goldman Sachs announced a $500 million program to support small businesses last fall, but it turned out to focus mostly on expanding business education rather than offering tangible financial help.

More promising is the revival of CIT Group ( CIT), which many small and mid-size businesses depend on for financing. The company's bankruptcy last fall fostered fears that the company's small-business lending would evaporate. That doesn't seem to have happened: After restructuring its debt, CIT emerged from bankruptcy relatively quickly and made a profit in the first quarter of 2010.

Also encouraging was JPMorgan's announcement that it would double its small-business lending in 2010. The bank said businesses with up to $20 million in sales would be eligible to apply for the earmarked funds, although the majority of new loans would be targeted to companies with less than $10 million in sales.

To facilitate those loans, JPMorgan hired an additional 325 small-business bankers and set up a dedicated phone line for customers whose loan requests have been declined; applicants can speak to a credit expert to find out what steps they can take to secure a loan in the future.

Overall, funding for small businesses is increasing, even if it's a trickle rather than a flood. The loans are there, but will borrowers come?

Elizabeth Blackwell is a freelance writer based in Chicago. She is the author of Frommer's Chicago guidebook, and writes for the Wall Street Journal, Chicago, and other national magazines.