New Small Business Loans
Although credit availability has eased since the global financial crisis, banks have been slow to lend to small businesses. According to a New York Federal Reserve report released in October, more than three-quarters of small businesses that applied for a loan during the first half of 2010 received “some” or “none” of the credit they desired.
Unlike big corporations, which can issue stock, sell bonds or take other measures to raise cash, small businesses are largely at the mercy of banks for financing. Big banks complain that it often doesn't pay for them to spend time and resources administering a small loan. With the SBA's new Small Loan Advantage incentive the paperwork burden is alleviated. Loans submitted electronically will be approved in minutes, according to the SBA. Other applications will be approved within one business day.
A second initiative, called Community Advantage, aims to get SBA-backed loans to underserved communities, such as minority and veteran owned businesses, as well as firms in lower-income or rural areas. The program encourages borrowers to develop a business plan and work with advisors. Applications should be approved within five to ten days. Both programs are expected to be up and running by March 15, 2011.