to survive, small business lending is adapting. Small business loans are an endangered species during the credit crisis, a stubborn legacy of the financial meltdown, housing crisis and Great Recession. But credit is making a comeback in unconventional ways, even as a banking industry holds back the U.S. economy while trying to fight its way out of the recession. The latest innovator is Sam’s Club, which announced a pilot program to offer small company loans to some of its members.
Many innovative small company lending
The credit crisis is holding back the growth, hiring and spending of businesses that Sam’s Club wants as part of their customers. As outlined by 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 business 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 online from Sam’s Club will be given $ 100 off the application fee, a 20 percent discount and a 7.5 APR. The terms are locked in for 10 years.
Small company and also the consumer spending stimulus
Sam’s Club decided to start offering small company loans online after a business survey of small business customers showed us 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 company customers, accounting for just more than half of its revenue. 200 people have applied for SBA loans with a 45 percent approval rate. The company says it does not expect small company loans online to be a big moneymaker, though it seems to be earning $ 50 for each financed loan. Sam’s Club hopes this will help consumers spend more freely.
One more innovator for small company loans
Small business credit could be loosening at banks too. Last week JPMorgan Chase announced a program to stimulate small company growth and hiring. The JPMorgan Chase small company loan program is not as accessible as the pilot for Sam’s Club members, but it represents an additional 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 that has been hired, up to 3 employees, for the life of the loan. Companies can qualify for lines of credit up to $ 250,000.
Interesting lending motives
The Sam’s Club small business loans online pilot is looked upon as an unusual move for parent business Wal-Mart. As outlined by 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 as a partner because ongoing efforts to add banking to its resume makes the financial industry nervous.
The small company loan success story
But Sam’s Club small business loan customers like Michael Golata don’t care about the politics behind the program. Golata, a contractor living in Louisville, Ky., for United Parcel Service, told the New York Times that he applied online for a $ 10,000 small company loan at 7.5 APR and got the money in 24 hours. He bought a new truck, hired three drivers and went from billing UPS $ 3,000 a week to $ 8,000.
Discover more info:
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
