to survive, small business lending is adapting. 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, 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.
Source of article: Small business loans adapt to survive credit crisis at Sams Club by Personal Money Store
The innovative small company lending
The credit crisis is holding back the growth, hiring and spending of companies that Sam’s Club wants as customers. According to MarketWatch, 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 company Administration. Small business loans could be offered online to members of Sam’s Club through a partnership with Superior Financial Group. Members who apply for a small business loan from Sam’s Club and online 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 indicated that tight credit was cutting into Sam’s Club retail sales. According to The New York Times, 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 business says it doesn’t expect small business loans online to be a big moneymaker, though it appears to be earning $ 50 for each financed loan. Sam’s Club hopes this will help consumers spend more freely.
Another innovator for small business loans
Small business credit also is loosening at some banks. Last week JPMorgan Chase announced a program to stimulate small company hiring and growth. The JPMorgan Chase small business loan program isn’t really as accessible as the pilot for all of Sam’s Club members, but it represents an additional oasis within 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 that is hired, for up to three employees, for the life of the loan. The offer is accessible for businesses that qualify for lines of credit up to $ 250,000.
Small business lending motives
The Sam’s Club small company loans online pilot is looked upon as an unusual move for parent company Wal-Mart. MarketWatch reports that 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 as a partner because ongoing efforts to add banking to its resume makes the financial industry nervous.
Small company loans and a success story
But Sam’s Club small business 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, explained to 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 bought a new truck, hired some more drivers and went from billing UPS $ 3,000 a week to $ 8,000.
Citations:
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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