Good borrowers for small company loans are in short supply

The U.S. Senate is about to vote on a bill that is designed to make small business loans more accessible. This bill will help create $ 300 billion in available capital to help smaller businesses. The bankers, though, are saying that a quick loans advance isn't what the industry needs. The concern is that it doesn’t matter how numerous short term loans are accessible, there simply are not enough credit-worthy small businesses.

Small business loan program

If the Senate passes this bill, $30 billion could be "injected" into community banks. The banks are expected to use this money to seed $ 300 billion in small business loans. An emergency loan for banks, this is intended to create jobs and small business credit. Only banks with $ 10 billion or less in assets would qualify. This bill is supported by both the National Federation of Independent Business and the American Bankers Association.

Good credit short for small businesses

Many of the banks that are a target for this small business lending bill are saying it will not help. Banks simply do not want to lend to people or businesses with a bad credit score, since that is how they got into trouble within the first place. There is a lot of demand for loans, but mostly from borrowers without good credit. Until they’re profitable and are seeing good sales, many companies don’t want to borrow.

High small business defaults

You will find many indications throughout the economy that small businesses need more than just credit. Loans that are guaranteed through the Small business Administration have been defaulting at a rate of almost a full 7 percent. The Bank of America has reported that twice that many loans have been "charged off" – assumed as noncollectable. 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.