Small business lending is adapting to survive. Small company loans are an endangered species during the credit crisis, a stubborn legacy of the financial meltdown, housing crisis and Great Recession. But small company credit is making a comeback in unconventional ways, even as a miserly banking industry holds back the U.S. economy as it tries to fight its way out of the recession. The latest innovator is Sam’s Club, which announced a program to offer small company loans to its members.
Post resource: Small business loans adapt to survive credit crisis at Sams Club by Personal Money Store
Some innovative small company lending
The credit crisis is holding back the growth, hiring and spending of all of the businesses that Sam’s Club wants as customers. MarketWatch reports that Sam’s Club, a unit of Wal-Mart Stores Inc., is testing a program to offer qualified members small-business loans from $ 5,000 to $ 25,000 backed by the Small business Administration. Small business loans could be offered online to all of Sam’s Club membership through a partnership with Superior Financial Group. Members who apply for a small business loan online from Sam’s Club get $ 100 off the application fee, a 20 percent discount and a 7.5 APR. Terms are locked in for 10 years.
Small business consumer spending stimulus
Sam’s Club decided to start offering small business loans online after a business survey of small company customers showed us that tight credit was cutting into Sam’s Club retail sales. The New York Times reports that just less than half of Sam’s Club membership is small business customers, accounting for just more than half of its revenue. So far about 200 individuals have applied for the SBA loans and about 45 percent have been approved. The company says it doesn’t expect small company loans online to be a huge moneymaker, though it earns $ 50 for each financed loan. Sam’s club hopes the payoff is to get consumers spending more freely.
A new innovator for small company loans
Small business credit also is loosening at some banks. JPMorgan Chase announced a program to stimulate small company growth and hiring. The JPMorgan Chase small business loan program is not as accessible as the pilot for Sam’s Club members, but it represents one more oasis in the credit crisis desert. The offer contains lowering the interest rate by 0.5 percent on a new business line of credit for each new employee hired, for up to 3 employees, for the life of the loan. Up to $ 250,000, the offer is available for businesses that qualify.
Motives involved in small business lending
The Sam’s Club small business loans online pilot seems like as an unusual move for parent business Wal-Mart. According to MarketWatch, Wal-Mart has been accused of harming small businesses with its aggressive pricing, scale and business methods. And a report at bnet said Wal-Mart chose Superior Financial, which is not a bank, as a partner because ongoing efforts to add banking to its resume makes the financial industry nervous.
Success stories from small business loans
But Sam’s Club small company loan customers like Michael Golata as an example, do not care about the politics behind the program. Golata, a contractor in Louisville, Ky., for United Parcel Service, told the New York Times that he applied online for a $ 10,000 small business loan at 7.5 APR and got the money in 24 hours. He then bought a new truck, hired 3 drivers and went from billing UPS $ 3,000 a week to $ 8,000.
More details accessible at these sites:
Marketwatch.com
marketwatch.com/story/sams-club-takes-on-credit-crunch-offering-loans-2010-07-06?reflink=MW_news_stmp
New York Times
nytimes.com/2010/07/05/business/05loan.html?_r=1&scp=1&sq=sam%27s%20club%20small%20business%20loans&st=cse
Bnet
blogs.bnet.com/business-news/?p=3188
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