A bill designed to help smaller banks make more loans to small businesses is about to be voted on by the U.S. Senate. This bill will help create $ 300 billion in accessible capital to help smaller businesses. The bankers, though, are saying that a quick payday loans advance isn’t what the industry needs. Businesses say that credit-worthy small business borrowers are simply in short supply.
Programs for small business lending
If the Senate passes this bill, $30 billion can be “injected” into community banks. Small company loans are the goal of this cash, using the $ 30 billion to seed $ 300 billion in loans. An emergency money for banks, this is intended to create jobs and small company credit. Only small banks that have less than $ 10 billion in assets would qualify for this money. The National Federation of Independent Business and American Bankers Association both support the bill.
Good credit short for small businesses
Some banks are claiming that it doesn’t matter how much money is available – small businesses won’t benefit. Banks simply do not want to lend to individuals or companies with a bad credit score, since that is how they got into trouble in the first place. There is lots of demand for loans, but mostly from borrowers without good 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. Loans that are guaranteed through the Small business Administration are defaulting at a rate of almost a full 7 percent. The Bank of America has reported that twice that numerous loans are “charged off” – assumed as uncollectable. One firm that specializes in small business credit cards had to declare bankruptcy after half of its accounts went into default in 2009.
