The U.S. Senate is about to vote on a bill that is supposed to make small company loans more available. The bill is intended to create $ 300 billion worth of small business capital. The businessman in the lending business are saying this quick cash advance won't help create more loans for small business. Businesses say that credit-worthy small company borrowers are simply in short supply.
Small company lending
The U.S. Senate is set to vote this week on a bill that will send $ 30 billion to community banks. Small business loans are the goal of this cash, using the $ 30 billion to seed $ 300 billion in loans. This money is intended as an emergency money for jobs and small business credit. The money would be accessible for banks with assets of less than $ 10 billion. There are two major supporters of the bill – the National Federation of Independent Businesses and American Bankers Association.
Smaller businesses lack credit
Many of the banks that are a target for this small company lending bill are saying it will not help. Banks don’t want to let individuals with a bad credit score borrow money — that is what caused the problem in the first place. There is quite a bit of demand for small company loans, but the demand is mostly from borrowers with bad credit. Until they are seeing sustainable profitability, many businesses don't want to borrow any money.
High defaults from small businesses
There are numerous indications throughout the economy that small businesses need more than just credit. Loans that are guaranteed through the Small business Administration are defaulting at a rate of almost a full 7 percent. Bank of America has said that twice that numerous loans – 14 percent – have been seen as uncollectable. A credit card firm that specializes in smaller businesses ended up going into bankruptcy after more than 50 percent of its cards went into default in 2009.
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