Creativity is beginning to hit the business credit/lending market, but will these new ideas translate into help for small business owners? Recently J.P. Morgan Chase & Co. began to offer a half point off on interest when a business hired new workers, up to a maximum of three. On another front, Sam’s Club will begin lending to certain business members through a partnership with SBA lender Superior Financial Group LLC. It remains to be seen, however, if either of these programs actually affects the current business lending situation.
Chase trumpets its new credit program as another indication of its dedication to small businesses, along with the hiring of over 200 more small business bankers and a 31% increase in lending in the first quarter compared to the previous year. The “Loan for Hire” program requires small businesses (annual revenue of $10 million or less) to either open a new credit line up to $250,000 or increase a current line by a minimum of $10,000 to qualify. Chase will then provide a 0.5% decrease in the interest rate for each new hire the business makes, up to a maximum of three. In addition, if the business has its checking account at Chase another 0.5% will be deducted, for a possible total of 2% reduction in interest. According to the bank, this could mean a savings of $4000 over 3 years on a $65,000 outstanding balance.
All of this sounds good, but the devil, they say, is in the details. First, and most important, a business has to qualify for a line of credit to have any chance at the savings. As CNN/Money.com points out (in “Hire an employee, get a loan break”, July 1, 2010), Chase, as most large banks, has cut its small business lending drastically over the past two years. The article also mentions that the lender does not separate its numbers for small business lending from the rest of its business lending data, so we only have the bank’s word on the 31% increase. Another important detail is that the new hires must be made in 2010, leaving less than 6 months to apply for credit, receive approval, and then decide if the business can support extra workers. This could be an even bigger stumbling block to getting the full benefit of the plan, as many small businesses are not in a position to be adding new employees at this time.
The other interesting lending news is Sam’s Club’s announcement that it will begin a lending program for its small business members. As reported by Fox News, the move is an effort to “set itself apart from other warehouse chains and build good will to bring in more business.” Quite a number of Sam’s Club’s members are small businesses, and the goal is to raise the company’s profile and boost its own business. Fox News also reports that the program will focus primarily on minority-, women-, and veteran-owned business. In its own coverage, CNN/Money.com explains that businesses that take advantage of the program will save $100 on fees and 0.25% on the interest rate. For brokering the deal with Superior Financial, Sam’s Club will receive a $50 fee.
Once again, a possible issue would be qualifying for the loan, but in this case the loans are being provided by a company that is a very active Small Business Administration lender. CNN/Money.com reports that Superior Financial specializes in $5,000 and $25,000 loans (the maximum under the Sam’s Club program) through the SBA “express loan” program. Only time will tell if this is going to be an idea that flies or if it will sink as rival Costco’s three previous attempts to work with small lenders.
If you are a small business owner who is considering applying for a business loan or credit, and you want some straight talk about your situation, my advice is always to talk to a professional who has experience with SBA and commercial loans. An SBA loan can be the best choice for many businesses, and an SBA loan expert will be able to help you make the best decisions for your business.
Chase trumpets its new credit program as another indication of its dedication to small businesses, along with the hiring of over 200 more small business bankers and a 31% increase in lending in the first quarter compared to the previous year. The “Loan for Hire” program requires small businesses (annual revenue of $10 million or less) to either open a new credit line up to $250,000 or increase a current line by a minimum of $10,000 to qualify. Chase will then provide a 0.5% decrease in the interest rate for each new hire the business makes, up to a maximum of three. In addition, if the business has its checking account at Chase another 0.5% will be deducted, for a possible total of 2% reduction in interest. According to the bank, this could mean a savings of $4000 over 3 years on a $65,000 outstanding balance.
All of this sounds good, but the devil, they say, is in the details. First, and most important, a business has to qualify for a line of credit to have any chance at the savings. As CNN/Money.com points out (in “Hire an employee, get a loan break”, July 1, 2010), Chase, as most large banks, has cut its small business lending drastically over the past two years. The article also mentions that the lender does not separate its numbers for small business lending from the rest of its business lending data, so we only have the bank’s word on the 31% increase. Another important detail is that the new hires must be made in 2010, leaving less than 6 months to apply for credit, receive approval, and then decide if the business can support extra workers. This could be an even bigger stumbling block to getting the full benefit of the plan, as many small businesses are not in a position to be adding new employees at this time.
The other interesting lending news is Sam’s Club’s announcement that it will begin a lending program for its small business members. As reported by Fox News, the move is an effort to “set itself apart from other warehouse chains and build good will to bring in more business.” Quite a number of Sam’s Club’s members are small businesses, and the goal is to raise the company’s profile and boost its own business. Fox News also reports that the program will focus primarily on minority-, women-, and veteran-owned business. In its own coverage, CNN/Money.com explains that businesses that take advantage of the program will save $100 on fees and 0.25% on the interest rate. For brokering the deal with Superior Financial, Sam’s Club will receive a $50 fee.
Once again, a possible issue would be qualifying for the loan, but in this case the loans are being provided by a company that is a very active Small Business Administration lender. CNN/Money.com reports that Superior Financial specializes in $5,000 and $25,000 loans (the maximum under the Sam’s Club program) through the SBA “express loan” program. Only time will tell if this is going to be an idea that flies or if it will sink as rival Costco’s three previous attempts to work with small lenders.
If you are a small business owner who is considering applying for a business loan or credit, and you want some straight talk about your situation, my advice is always to talk to a professional who has experience with SBA and commercial loans. An SBA loan can be the best choice for many businesses, and an SBA loan expert will be able to help you make the best decisions for your business.
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