Revelations as to who is getting funded by the SBA are raising critical voices around the organization’s activities.  What do luxury car dealerships, exclusive resorts, and boutique cosmetic surgery clinics all have in common? According to an article contributed to Forbes by Adam Andrzejewski, they are all among businesses aimed at serving the needs of the very wealthy that are recipients of subsidized SBA loans, supported by taxpayer money. The SBA does not directly provide business loans, rather it guarantees the loans against tax payer money, with the intent of providing subsidized rates for small businesses that need capital to grow, but are wary of taking a loan from a private bank carrying a rate that they can’t afford, or simply can’t get approved for a typical loan without a government guarantee provided by the SBA. However, in the cases that are pointed out in the Forbes article, luxury businesses that could most likely get a loan from a wide number of private financial institutions

SBA Goes after EPA Clean Water Rule

Thursday, 02, October , 2014 by

Clean water rulings from the EPA attempting to extend its jurisdiction to include not only America’s navigable lakes and rivers but feeder streams and ponds as well have come under fire from the SBA, who says they are representing the voices of Farming small businesses in particular as well as those who take issue with the potentially great expansion of jurisdiction the rule would represent for the EPA. However, according to earlier surveys of small business owners, a large majority were in favor of increased environmental protections that would protect the cleanliness of local waterways. Many businesses rely on the cleanliness of their local water as it directly impacts the cost of food production and the costs of doing business for many other industries. In a clarifying statement from Liz Purchia, EPA spokeswoman, the rule was defended as only a clarification of existing authority that would create no new requirements for small businesses. Is this rule really the issue, or are small business owners in general

As reported by Yahoo Small Business, the WAIN Street monthly business default index reports a decrease in default rate for small business loans from the first half of the year by .11 percent for a rate of 6.98 percent, with rates at pre-recession levels. Additionally, the index revealed that the lowest default rates were concentrated around the smallest of the small businesses included in the index, with a 4.05 percent default rate among sole proprietors and 5.65 percent among those with fewer than 20 employees. With strong credit performance coming from these businesses, it bodes well for the growth of their credit options going into the next few quarters. The smallest SMBs have had some of the hardest times applying for financing from traditional banks. The fact that they are some of the strongest performers when it comes to paying back debt obligations makes this fact even more pronounced, however, due to excessive costs related to underwriting small business loans that do not slide with the

In a recent article from the Wall Street Journal, research from the Fed was cited indicating that the negative effects of the recession, the worst since the two recessions in the early 80’s, had a disproportionate impact on smaller businesses (in this case, businesses with 50 or fewer employees). These businesses were cited as experiencing an approximately 5-10% worse drop in job creation, paired with a slowdown on the creation of new businesses by 25%. Financing constraints pointed to as one of the root causes of small business stagnation. The credit crunch which accompanied the recession has been cited as one of the causes of the lack of growth coming from the small business sector, with former SBA chief Karen Mills also pointing to lack of loan accessibility as an adverse condition for small businesses. Without reliable access to financing, businesses have a hard time expanding beyond the constraints imposed by their cash flows and ability to borrow from friends and family or out of personal

  As the credit market for small business lending continues to feel the aftereffects of the great recession, small businesses are still struggling to obtain loans from the traditional banking establishment. In a recent article that appeared on INC.com, former SBA Chief Karen Mill’s Harvard Business School paper was cited revealing just how tough the recession was for smaller businesses, as well as the resulting “credit crunch” on the part of banks whose after-effects are still being felt today. The paper revealed the thought processes behind banks deciding to move away from smaller loans, since within traditional banking the costs of underwriting a hundred thousand dollar loan are comparable to the costs of underwriting a million dollar loan, but with a lower profit margin for the bank. Alternative capital allows these markets to be served quickly and effectively. One of the reasons why alternative capital represents the potential for introducing major change to the way banking works is that within the industry, a different approach to

In the aftermath of Hurricane Sandy, the US Small Business Administration was widely criticized for what many saw to be a sluggish response to the natural disaster, where many businesses that needed aid in the form of SBA backed loans were not able to have their applications processed within 30 day, with the average of 51 days turnaround for disaster loans. Now, watchdogs tasked with monitoring the Federal organization claim that the numbers posted by the SBA were padded by a large number of fast redirections of applicants for bad credit business loans. As reported by App.com, 40% of the total disaster loan requests processed were bad credit loan requests which are typically diverted out of the main application channel within 3 days. Bad credit business loan applicants would significantly effect average processing time. If 40% of the reported applications processed were quickly diverted to other relief channels, removing them from the average processing time would have major implications regarding the average processing time of the

While news of the recovering economy and increasing small business loan volume should be a cause for celebration, many small business owners aren’t feeling the sense of relief that others are reporting on. The Huffington Post recently pointed to statistics that paint a slightly different, yet importantly distinct picture. Business loans have gone up, but mostly to larger, more established businesses, while volume for medium and smaller businesses has actually gone down. Big banks are moving progressively farther away from small business lending, or are focusing on businesses that, while technically included in the category of SMBs, are towards the larger end of the spectrum and considered to be safer bets. Small business owners often don’t have traction with banks that have higher standards for approval than many of them are able to meet. Bad credit is a major issue on the part of small business owners looking for capital, but other issues that can stop them from getting approvals include being in industries that

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