Is the SBA a Viable Option for Bad Credit Business Loans?
The U.S. Small Business Administration is an organization that many small business owners in the US don’t exactly understand. For many, the organization’s role may not be clear, as evidenced by the number of business owners (or would be business owners looking for start up capital) who ask for loans on their message boards. The SBA does not provide loans directly, rather, it provides backing for small business loan programs provided by banks. With the current high underwriting criteria on the part of these banks, many small businesses are finding it difficult to qualify for these programs. Efforts to help these businesses, for example by changing procedures around accessing holiday lines of credit, are often less than effective. The Herald Tribune’s recent story on new SBA programs highlights the inefficiency of the changes by pointing out there are still too many businesses being denied access to the capital they need, when they actually need it.
More troubling, business owners who have bad credit usually cannot benefit from SBA programs. These small business owners are put into a very difficult place when they are unable to obtain SBA loan backing, since SBA loans are supposed to allow businesses with tougher financial circumstances the chance to obtain financing where the Government removes some of he risk that the bank would otherwise take on. If the programs that are ostensibly helping them are ineffective, entrepreneurs searching for bad credit business loans have to keep looking for solutions to their cash flow constraints.
Bad credit among business owners was exacerbated by the events of 2013. From natural disasters to the Government Shutdown, small business owners had a lot to contend with over the past year. For those that already had credit issues, the events that took place or had an effect in their area could have served to exacerbate already existing problems. Many business owners who formerly had a handle on their financial situations faced the loss of important revenue streams. That’s why the availability of alternative financing has become so important of late. While the efforts on the part of the SBA are laudable, there are simply too many business owners who, due to their credit issues and other financial problems, slip through the cracks in the system. Financing options for these business owners allow them the chance to continue to grow their businesses and create employment opportunities, as well as get a handle on their financial futures.
Photo Credit to ShashiBellamkonda on Flickr