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 when 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 its members.
The 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 company Administration. Small business loans will be offered online to all of Sam’s Club membership through a partnership with Superior Financial Group. Members who apply for a small company loan from Sam’s Club and online get $ 100 off the application fee, a 20 percent discount and a 7.5 APR. The terms can be locked in for 10 years.
Small business and the consumer spending stimulus
Sam’s Club decided to start offering small business loans online after a business survey of small business 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. 45 percent of the 20 people that have applied for SBA loans were approved. The company says it does not expect small company loans online to be a big moneymaker, though it earns $ 50 for each financed loan. Sam’s Club hopes this will help consumers spend more freely.
Small company loan innovator
Small business credit also is loosening at some banks. Last week JPMorgan Chase announced a program to stimulate small business hiring and growth. The JPMorgan Chase small company loan program isn’t really as accessible as the pilot for Sam’s Club members, but it represents another oasis that is within the credit crisis desert. The offer involves lowering the rate of interest by 0.5 percent on a new business line of credit for each new employee hired, for up to three employees, for the life of the loan. Companies can qualify for lines of credit up to $ 250,000.
Interesting small business lending motives
The Sam’s Club small company loans online pilot is an unusual move for parent business Wal-Mart. It was reported by MarketWatch that Wal-Mart has been accused of harming small companies 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.
Success stories from small company loans
But Sam’s Club small business loan customers like Michael Golata as an example, don’t 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 then bought a new truck, hired 3 drivers and went from billing UPS $ 3,000 a week to $ 8,000.
Discover more details here:
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
