Small business lending has to adapt to survive. Small business loans have been 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 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 companies that Sam’s Club wants as 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 can be offered online to all of Sam’s Club membership through a partnership with Superior Financial Group. Members who apply for a small business loan from Sam’s Club and online get $ 100 off the application fee, a 20 percent discount and a 7.5 APR. The terms will be locked in for 10 years.
About the small company 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. 200 people have applied for SBA loans with a 45 percent approval rate. The company says it doesn’t 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 business loans
Small company credit can 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 isn’t really as accessible as the pilot for all of Sam’s Club members, but it represents one more oasis 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 that is hired, for up to three employees, for the life of the loan. Up to $ 250,000, the offer is available for companies that qualify.
Some of the small business lending motives
The Sam’s Club small business loans online pilot is looked upon as an unusual move for parent business Wal-Mart. MarketWatch reports that 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, 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, 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.
Citations:
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
