Small business lending has to adapt to survive. 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 in unconventional ways, 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 pilot program to offer small business loans to some of its members.
The innovative small business lending
The credit crisis is holding back the growth, hiring and spending of companies that Sam’s Club wants as part of their customers. It was reported by MarketWatch 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 Sam’s Club membership through a partnership with Superior Financial Group. Members who apply for a small business loan online from Sam’s Club get $ 100 off the application fee, a 20 percent discount and a 7.5 APR. Terms are locked in for 10 years.
Small company 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. 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. 45 percent of the 20 people that have applied for SBA loans were approved. The business says it does not expect small company loans online to be a huge moneymaker, though it earns $ 50 for each financed loan. The payoff is to get consumers spending more freely — Sam’s Club hopes.
A new innovator for small company loans
Small company credit can be loosening at banks too. JPMorgan Chase announced a program to stimulate small business growth and hiring. The JPMorgan Chase small company loan program isn’t 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 consists of 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 3 employees, for the life of the loan. Up to $ 250,000, the offer is accessible for businesses that qualify.
Motives involved in small company lending
The Sam’s Club small business loans online pilot seems like as an unusual move for parent company Wal-Mart. As outlined by MarketWatch, 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, which is not a bank, as a partner because ongoing efforts to add banking to its resume makes the financial industry nervous.
Success stories from small business loans
But Sam’s Club small business loan customers like Michael Golata 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 purchased a new truck, hired some more drivers and went from billing UPS $ 3,000 a week to $ 8,000.
More details accessible at these sites:
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
