It is no surprise to many that that Bank of America is attempting to cast off its small-business customers — “systematically,” as The Times put it. In the fall of 2008, Kenneth Lewis, the bank’s then-chairman and chief executive, referred to its small-business loan portfolio a “damn disaster.” Since then, that portfolio has shrunk by nearly a third, although the decline has occurred principally in small commercial real estate loans.

Recently, Bank of America’s Small Business Administration general business lending fell by 89 percent. Rohit Arora, chief executive of Biz2Credit, which helps small businesses find loans, said many of his prospective clients are current Bank of America customers. “We are finding pretty consistently that bank of America is almost at the top of the list of banks whose existing customers are shopping around for other avenues right now,” he said.

Bank of America notified thousands of customers with revolving credit lines that their loans would come due in full. However, Jefferson George, a spokesman for the bank, said that the intention was not to force immediate repayment or higher interest rates. Nor did the notices take aim at poorly performing businesses, or businesses in industries or parts of the country where the bank felt overexposed.  He said, it was to rewrite the agreements for a small portion of its line-of-credit loans, giving the bank more control over the terms.

With a revolving line of credit, a company can borrow up to a set credit limit, and as it pays off existing debt, the amount of credit available for borrowing increases. Normally, revolving credit lines are a year in length.  Loan officers at Bank of America, opened some lines of credit without maturities or formal renewal processes. It was these loans that the bank was trying to rein in. Mr. George said, “We had a small percentage of clients who had a product that wasn’t in line with our current credit products,” he said. “And all we did was added a maturity date and a renewal process.

“I don’t want to minimize this,” Mr. George continued. “It is a change for customers, and that’s why we gave them a year’s notice.”

In one version of the letter Bank of America sent to clients, dated November 2010, the bank set an expiration date for the line of credit, in January 2012, and added terms to the loan agreement that required the borrower to “repay in full any principal, interest or other charges outstanding” by the new expiration date. However, the letter also gave the option for the credit line to be extended with a separate written renewal notice from the bank — with potentially new terms.

Bank of America would not comment on the record how many small-business customers became subject to maturity dates and renewals. However, he said that the group amounted to “a very small percentage of our roughly 1.5 million small-business credit customers.” Of these, Mr. George said, “the majority of customers — more than 90 percent — qualified for renewal at the same rate. The others had the option to pay in full or restructure their agreement with different terms.” Mr. George added that he was unaware of any instance where a customer was not offered an extension one way or the other.

Mr. George said, “98 percent of customers in this small, specific group” have renewed their loans on the same terms or on new terms, which included a higher interest rate, a reduced credit line, or both. In some cases, lines of credit became term loans. The number of borrowers with whom Bank of America has not reached any agreement, Mr. George said, amounted to one-tenth of 1 percent of those small-business credit customers. One-tenth of one percent of 1.5 million would be 1,500 customers — not exactly a sweeping retrenchment from the small-business credit market.

Bob Coleman, who publishes a newsletter for the S.B.A. lending industry, said Bank of America is acting sensibly by changing the terms of its lines of credit. The borrowers who have been left behind appear to have been abusing the system. “A line of credit is you borrow the money from the bank, you pay your vendors, and a few months later, you pay back the bank, and you do it again next year,” said Mr. Coleman. But some borrowers, he said, turn what is meant to be a seasonal tool into an evergreen, and effectively never pay down the principal on their lines of credit.

That’s always been a problem for banks, Mr. Coleman said, but it is becoming more untenable today. “The regulators will not allow you to have an evergreen loan,” said Mr. Coleman. “If you have a $100,000 line of credit, and all you’re doing is making interest payments, regulators are going to say that’s not a line of credit, that’s a loan.”

An alternative to traditional business loans is a Merchant Cash Advance. This program allows a small business to pay the loan back at their own pace, because the amount that is paid back to the lender is an agreed upon percentage of the businesses credit card sales.

Small business borrowing is on the rise, with many businesses expanding, incorporating technology to enhancement efficiency and outsourcing.

According to the Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to small businesses, lending jumped 20 percent in October. It was the 15th month of double-digit growth.

While the markets may be unstable, there is an underlying strength in the U.S. economy that is not being reported by stock market indices.The reason we are not seeing this profitability reported is due to the fact that these businesses are privately owned companies.

According to most analysts, the U.S. gross domestic product will likely be stronger over the next two to five months, based on the growth of small business lending. Small businesses are in better fiscal shape then in 2005, prior to the recession, with considerable improvement in risk profile.

Banks are actively looking for earning assets, small business offer an opportunity to diversify their loan portfolios.

Agriculture, manufacturing and construction businesses are gaining traction, and equipment producers for these industries are benefitting from the new investment.

Businesses that are borrowing now are making a four-year wager, and would not be making that gamble without definitive signs of consumer demand. The cost of doing business has risen, and the Business Loan industry is closely observing federal tax policy and other regulatory changes that could negatively affect momentum.

Five new banks have pledged to fund the expansion of a Baltimore County loan program targeted at helping small businesses, county officials announced Wednesday.

The Baltimore County Small Business Loan Partnership’s fund will grow by $2.35 million, with the total fund being worth $12.35 million up from its current value of $10 million, said Fronda Cohen, spokeswoman for the county’s Economic Development Department.

The program assists businesses located in Baltimore County or planning who are planning to relocate to Baltimore County, with purchasing real estate and equipment. The program is a partnership between private lenders and the county’s Economic Development Department.

In order to qualify for the program, businesses must employ fewer than 100 people when they apply. The maximum loan amount is $500,000 or 40 percent of the applicant’s project, whichever is less.

Loans from the fund require 10 percent equity, rather than the typical 20 percent required by banks. The program also assists business owners in receiving favorable terms on the loans.

“These loans are critical to providing small businesses with capital to invest in people, equipment or buildings,” County Executive Kevin Kamenetz said in a statement.

The five lenders that joined the program are: CFG Community Bank, Sandy Spring Bank, Peoples Bank, Northwest Savings Bank and TD Bank. The addition of these lenders brings the total number of participating banks to 20.

“The fund will assist business owners in obtain loans that they otherwise wouldn’t be able to”, said Patrick Shurney, a senior vice president and Chesapeake region market leader at Sandy Spring.

“There’s not much access to capital out there right now, so small businesses are really struggling,” he said.

This program will give small business owners another financing option other than traditional Business Loans, Merchant Cash Advance, or a Business Cash Advance.

The program started in 1996. For more information, call 410-887-8000.

“Necessity is the mother of invention, so people have been finding creative ways to get financing,” says Portland, Ore.-based business expert Steven Strauss, author of Get Your Business Funded: Creative Strategies for Getting the Money You Need. “But it’s actually a pretty good time to go out and get a bad credit business loan.” Legislation, stimulus money and a recovering economy are all contributing to a better commercial lending landscape, he says.

When it was signed into law, the Small Business Jobs Act of 2010 established a $30 billion fund that encourages lending to small businesses by providing capital to qualified community banks with assets of less than $10 billion. The Small Business Lending Fund provides those lenders with low-cost capital with an interest rate as low as 1% if they best their 2009 small-business lending levels — a strong incentive to dole out the dough.

SBA chief Karen Mills is hopeful about the community bank option. “I’ve worked with a lot of small businesses over the years. They like the relationship they have with community banks,” Mills notes. “Those lenders know what’s happening on Main Street often better than anyone else.”

But the lending activity isn’t only in small banks. On the heels of becoming the No. 1 SBA lender in the U.S. in 2010, financial services firm JPMorgan Chase announced in April that it would loan $12 billion to American small businesses in 2011, a 20% increase over its 2010 commitment. During the first quarter of 2011, Chase increased its lending 64% to businesses with annual sales of less than $20 million.

State and regional economic development agencies have also beefed up specialty lending programs, often focused on economically challenged communities or targeted toward specific sectors, author Strauss says. Private banker Xavier Leclair recommends getfastcapital.com as a useful tool for small businesses seeking state or regional business loans, merchant cash advance loans and equipment financing since it provides links to a wide variety of economic development agencies nationwide.

Veronica James came up with the idea of creating purses and blankets that can be transformed into smaller, easier to carry bundles.

“I’m a designer. I’ve been designing my whole life,” she told News 2, “it’s what I like to do.”

Without money, there was not much else she could do and the banks weren’t lending, and had no programs for unsecured business loans.

“A lot of people have great ideas and it’s so difficult to take an idea from a concept and actually bring it to market,” James continued. When all those doors shut, and I couldn’t get anyone to even look at my business and say, ‘Hey there’s something here.’”

With no other options, she held up a sign and her perseverance got noticed, taking her from a street corner with a sign to the Cool Springs Galleria.

It was then that her blog, WillWorkforLoan.com and sign, got the attention of someone in California, who helped her get a loan.

She got the needed money and her company, Urbandillo, was born.

Business is growing, and James said she is quickly introducing her product to consumers.

She says that economy and closed doors are no excuse for not succeeding.

“If you have a desire, a design, a dream, you have to do what it takes to get it done because it will, it will happen,” she said.  Business loans are hard to get, but with the right combination of perseverance, passion, dedication, and conviction in your business plan, they are not impossible after all.

If you’re in need of a small business loan, there’s good news from Washington. A program from the Small Business Administration (SBA) aims to expand access to capital for small businesses. Funded through the American Recovery and Reinvestment Act, the new program encourages sales into the secondary market of loans made through the SBA’s 504 Certified Development Company program. This will increase liquidity for lenders, which in turn means easier access to credit for small businesses.

In addition, President Obama signed the Small Business Jobs Act of 2010 on Sept. 27, 2010. The new law provides tax incentives, such as extending and enhancing bonus depreciation and Section 179 expensing, and extends the SBA Recovery loan program (see below).

More Credit Available

SBA guarantees on loans help businesses by absorbing some of the loan risk lenders take on. Under the SBA’s 504 loan program, commercial lenders generally supply 50% of the funds, a nonprofit known as a Certified Development Company provides 40% and the borrower pays 10% of the project’s cost. With the new program, the SBA guarantees 80% of the commercial lender’s stake in the loan. This means that lenders may be able to offer credit more freely.

To be eligible under this program, 504 loans must be disbursed on or after Feb. 17, 2009. The program will be in place until Feb. 16, 2011, or until $3 billion in new loan pools are created, whichever comes first.

Another Boost for Businesses

The Small Business Jobs Act of 2010 extends the SBA Recovery loan program and offers billions more in lending support for small businesses:

• Extends SBA Recovery loans, which feature a 90% guarantee and reduced fees, through Dec. 31, 2010. The White House reports that this provides the capacity to support $14 billion in loans to small businesses.
• Permanently increases maximum loan limits for 7(a) and 504 loans from $2 million to $5 million ($5.5 million for manufacturers in 504 loan programs). Increases microloan limits from $35,000 to $50,000. This gives small businesses much more flexibility to grow, purchase new inventory and create jobs.
• Increases the alternate size standard to those small businesses with less than $15 million in net worth and $5 million in average net income, making many more small businesses eligible for SBA loans.

Turn to the Small Business Loan Experts

If your business needs a loan that will help it create or retain jobs, talk with an experienced lender at GetFaslCapital. We have money to lend and are ready to help! Learn about GetFastCapital’s small business loans and merchant cash advance programs online.

Iowa small businesses can access loans ranging from $2,500 to $50,000 at an interest rate of 3.9 percent. If an ISBLP loan is combined with financing from a local lender, the interest drops to 2 percent, if the cofinancing is for at least one-third of the total loan package amount. To be eligible, a small business must be located in Iowa; must be owned, operated, and actively managed by a state resident; and have 35 or fewer full-time equivalent employees. Eligible businesses must also have a business plan and receive assistance from an Iowa Small Business Development Center or another qualified public or nonprofit business consultant approved by the Iowa Department of Economic Development. Additional restrictions regarding environmental, employee safety, and labor regulations also apply.

The Small Business Administration posted a record year for lending in South Dakota – again.

The state office recorded a record 72 loans for its 504 program – typically used for fixed assets such as land purchases or building projects – for the fiscal year ending Sept. 30.

The SBA also lent a record $77 million in 7(a) loans, typically used for working capital. While that total represented a record dollar amount, the agency’s 362 loans was the third-highest yearly total, according to SBA statistics.

Last fiscal year, the SBA also posted a record year in the dollar amount of 7(a) loans approved.

“South Dakota lenders helped small businesses take advantage of the higher loan guarantees and fees waivers,” SBA District Director John Brown II said about the 7(a) program. “Even in these challenging economic times, our small business loan volume increased by over 17 percent from the previous record loan dollar amount of just last year.”

The record year was pushed, in part, by the American Recovery and Reinvestment Act of 2009, which raised the guarantee percentage rate and eliminated fees for most SBA loan programs. The program recently was extended through Dec. 31 with the signing of the Small Business Jobs Act.

The Jobs Act also permanently increased 7(a) and 504 limits from $2 million to $5 million and will allow some small businesses to refinance owner-occupied commercial real estate mortgages and bad credit business loans into the 504 loan program.

Forty-five lenders participated in the SBA’s 7(a) program and 31 lenders participated in the 504 program.

Dakota Business Finance of Sioux Falls was the lead lender in the 504 program with 23 loans totaling $6.2 million. That’s an increase from 15 loans the previous year.

The company began offering loans in 2006, said Lynne Keller Forbes, executive director. The CDC also had two out-of-state loans for a year-end total of 25.

“I think the fee waivers helped some,” Keller Forbes said. “I also think banks are becoming more aware of the program and probably more comfortable working with us in the program.”

Since the new fiscal year started Oct. 1, Keller Forbes said they already have approved four business loans.

“I think it’s going to be a great year for us,” she said.

Merchant Cash Advance

Many small businesses have suffered in this past economic recession and have been unable to obtain business loans from their local banks to increase inventory, consolidate debt, or expand their businesses. Paramount Merchant Funding, recently named “Platinum Merchant Cash Advance Provider” specializes in unsecured forms of lending for small to medium size businesses. “A lot of people just don’t know about our form of financing,” says Paramount Merchant Funding CEO Jared Feldman. “It’s fast and easy, and many companies use our product to expand and get them through difficult times.” The company tripled in size this past year as more businesses have resorted to alternative methods of financing.

A merchant cash advance is actually not considered a true loan, but a purchase and sales agreement. The small business owner sells their future credit card receivables at a discounted rate. The merchant cash advance provider will receive a percentage of the merchant’s credit card receivables until the advance is paid back in full. Unlike a bank loan that requires a fixed amount every month; merchant funding providers take a percentage of sales. “This is the most appealing aspect of merchant funding to our customers. When their business has a slow month, they pay us less. When sales increase, they pay more to bring down their balance.”

While merchant cash advances are typically more expensive than traditional bank loans, they are also an unsecured form of funding, thus creating risk for the provider. Jared added, “We’ve seen a lot of merchant cash advance providers go under this past recession due to bad investments. It’s risky on our end because we are dealing with businesses like restaurants that traditionally have high failure rates. There is no collateral attached to the advance, so if the business fails, our investment is at risk. With merchant funding, there is no personal guarantee or collateral attached to the advance which also allows the transaction to be completed within a 5-7 days as opposed to bank which can take several weeks or even months. “Small business owners that do qualify for bank loans are still sometimes skeptical. They know if they default, the bank will come after their house, car, or anything else of value. This is a major selling point for our product.”

While merchant funding is not the answer for all small businesses, it is an option that more and more are trying out. Many small business owners are hesitant to try this type of financing when they have never heard of it before. “I-tech is a perfect example. They were not sure if this product was the right choice for their business, so they started with a small amount. Once they realized how it helped their cash flow, they came back for additional funding three months later and then again four months after that.”

CONTACT:
Address:
261 W. 35th Street, Suite 400
New York, New York 10001

Toll Free: 888-221-6031
Fax: 888-715-3737
Website: www.ParamountMerchantFunding.com

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The Tennessee Bankers Association officially announed today the creation of a fund to provide up to $25 million for small business loans to Tennessee small businesses.

Intended for businesses with fewer than 100 employees, the business loans will be administered by the non-profit Pathway Lending, and will provide money for business expansion and job creation, said Clint Gwin, president of Pathway.

A drive has begun to gain commitments from banks to participate in the public-private partnership, and Pathway hopes to have the banks’ portion of the fund in hand within a year, Gwin said.

 “Small businesses create the majority of new jobs in our communities and they are playing a major role in the economic recovery of our state,” said state Rep. Craig Fitzhugh, D-Ripley, a banker who also is chairman of the state bankers’ association. “We must continue to show our support by finding creative and effective ways to develop resources so that businesses in Tennessee cannot only survive, but thrive.”

 The loans are available to small businesses all over Tennessee, and will have current market interest rates, Gwin said.  Unsecured business loans are however not available to business owners as per this program.