For small business, a lot of lending is moving online

Logo_Harvard_Business_ReviewWe’ve read multiple stories recently (here are just a few one, two, three, four…) about small business lenders accomplishing astonishing numbers with online lending platforms. In our research we’re finding that this new money appears easy to get (the online applications and due diligence are relatively simple), but the price is steep (annualized interest rates of up to 70%).

Problem is, small businesses have fewer financing options now then in the last decade. Indeed, small businesses have suffered 3 ways when it comes to acquiring capital they need to grow. According to the Harvard Business Review:

  1. “A decades-long trend toward consolidation of banking assets into fewer institutions is eliminating a key source of capital for small firms….”
  2. “…collateral owned by small businesses lost value during the financial crisis, potentially making small business borrowers less creditworthy today…”
  3. “In the recent recession, small-business sales were hit hard and may still be soft, undermining their demand for loan capital…”
  4. “…. tightening on loan terms, including the Federal Reserve Senior Loan Officer Survey, for small businesses increased at double-digit rates during the recession and recovery, and have eased at just single-digit rates over the past several quarters. Loosening has been much slower and more tentative for small firms than for large firms…” (italics added)

Despite the low barriers to lending, these expensive online lenders are not a sustainable solution to small business borrowing needs. What’s often overlooked in this discussion of small business loans are SBA loans. SBA loans are available from banks and non-bank lenders to American small businesses that “can not get credit elsewhere” (small businesses that are underserved by traditional lenders) at competitive rates (about 6%) with an SBA guarantee.

~ Norris Lozano

CEO of BusinessUS

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Los Angeles Latina Maria Contreras-Sweet to Get Nod to Head SBA

Obama_SBA Chief Maria Contreras-SweetIn a widely reported breakthrough, President Obama will soon be announcing the selection of a new SBA chief: Maria Contreras-Sweet.

Ms. Contreras-Sweet brings a stunning resume to the cabinet-level position, as reported in BusinessWeek:

“Contreras-Sweet immigrated to the U.S. at the age of 5 and went on to achieve a number of firsts, including being the first Latin American woman to serve on the board of Blue Cross California, and first to hold a cabinet secretary position in California state government. (She was California’s secretary of Business, Transportation, and Housing from 1999 to 2003.)”

And according to the Washington Post, she is very focused on underserved borrowers: “In addition, he said, she has “focused extensively on access to capital for a segment of the small business community that has more trouble getting capital than most, so she understands the pressing need for credit and capital of many small business owners.”

“The selection of Maria Contreras-Sweet to the lead the SBA is significant in many ways,” said Norris Lozano, CEO of California-based BusinessUS. “We are looking forward to strong guidance and shared mission to provide new capital resources to underserved small businesses.”