Saturday, July 31, 2010

Very little supply of small business borrowers

Trying for making more small business loans more available is the goal of the bill the U.S. Senate is set to vote on. The bill is intended to create $ 300 billion worth of small company capital. The businessman in the lending business are saying this quick cash advance won't help create more loans for small business. Companies say that credit-worthy small business borrowers are simply in short supply.

Small company lending

$ 30 billion could be sent to community banks if the new bill in the Senate passes. Small company loans are the goal of this money, using the $ 30 billion to seed $ 300 billion in loans. This emergency cash loans is intended to increase the accessible credit for small businesses and create jobs. The cash would be accessible for banks with assets of less than $ 10 billion. There are two major supporters of the bill – the National Federation of Independent Businesses and American Bankers Association.

Good credit short for small businesses

Large banks are saying that smaller businesses may not benefit from this lending bill. Many banks are skittish about lending to individuals with poor credit, because that is what caused the recession within the first place. There is quite a bit of demand for small company loans, but the demand is mostly from borrowers with bad credit. Until they are seeing sustainable profitability, many businesses don't want to borrow any money.

High small company defaults

There are numerous indications throughout the economy that small businesses need more than just credit. The Small business Administration reports a default rate of almost 7 percent already this year. Bank of America has reported that 14 percent of small business loans were charged off already this year. After half of its accounts went into default, a business that specialized in offering small business credit cards had to declare bankruptcy.

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