Signs of Life in Small-Business Funding
June 23, 2011 | Business Loans
The words good news and commercial lending haven’t been common in the same sentence for years. However, several recent developments in commercial lending offer signs of easing from tightfisted lenders.
“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.
