Small business lending has to adapt to survive. Small business 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 program to offer small business loans to its members.
Some innovative small business lending
The credit crisis is holding back the growth, hiring and spending of all of the companies 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 business Administration. Small business loans can 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 will be given $ 100 off the application fee, a 20 percent discount and a 7.5 APR. Terms are locked in for 10 years.
Small business consumer spending stimulus
Sam’s Club decided to start offering small company loans online after a company survey of small business customers indicated that tight credit was cutting into Sam’s Club retail sales. It was reported by The New York reports that just less than half of Sam’s Club membership is small business customers, accounting for just more than half of its revenue. So far about 200 individuals have applied for the SBA loans and about 45 percent have been approved. The company says it does not expect small business 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.
A new innovator for small company loans
. Last week JPMorgan Chase announced a program to stimulate small business growth and hiring. The JPMorgan Chase small business loan program isn’t really as accessible as the pilot for all of Sam’s Club members, but it represents another oasis within the credit crisis desert. The offer includes 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 three employees, for the life of the loan. Up to $ 250,000, the offer is accessible for businesses that qualify.
Interesting lending motives
The Sam’s Club small company loans online pilot is an unusual move for parent business 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.
The success story of the small company loan
But Sam’s Club small business loan customers like Michael Golata as an example, do not care about the politics behind the program. Golata, a contractor 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.
More information about this topic at these websites:
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
