adwordsmakemoneyblog.com |

It does not matter what line of work you are in you have been seeing cutbacks, cost reductions and more cutbacks. We are all being forced to do more with far less. Every one knows people that have lost their jobs to these economic factors.

As in the NY Times on March 15, 2009 ”It’s a huge step in the right direction,” Giovanni Coratolo, director of Small Business Policy at the U.S. Chamber of Commerce, said Saturday. ”In this economy, having the least amount of risk for banks will incentivize banks to lend to small businesses. A lot of small businesses will benefit from this.” [http://www.nytimes.com/aponline/2009/03/15/washington/AP-Obama-Small-Businesses.html?hp]

So what are they referring to? SBA Loans and the way they are structured. Currently the US Government guarantees up to $20 billion in SBA Loans. But of these $20 billion, how many are being written? In 2009 we are on pace to write less than half of these loans, so how will guaranteeing more of these loans help the economy? It wont, there needs to be more that just saying they will guarantee more loans since much of the pool is not being used now.

The new administration is planning on buying up the slack? By Temporarily eliminating some upfront fees on some of the SBA loans and increasing the guarantee caps to the lenders for these Business Loans. Basically they are looking to off set some of the administrative costs and reduce the risk for the lenders of the SBA loans.

The question now becomes is this enough or just a token to say they are doing something that is left to be seen obviously but lets take a look at this from a business prospective.

If the loans that are out there now are defaulting at say 20% (which is conservative) and the expected default rate is on any given Business Loan traditional lenders will accept is 5% based on their portfolio. The new plan from Obama gives a 5% additional guarantee on the defaults. So when you take a 20% actual default rate, a planned default rate of 5% and a 5% reduction in that risk, what do you get? Yes, that is right10% over the acceptable allotment. Now what happens? The restrictions will not change much if any because we are still over the 5% default rate.

There is the bad news, but there is significant good news here too. Now, finally, there is something being done to try to help the small companies, not just the major corporations. We will need more than this to get the economy moving but this is in the right direction.

There are so many alternatives to SBA or bank loans today that are offered by Commercial Finance Brokers as they access to funds for Accounts Receivable Financing, Export Factoring, Purchase Order Finance, Commercial Equipment Loans and Commercial Real Estate Mortgages. Be sure to do you checking around into the various options available to you as there is a loan available for most circumstances if you have the right Finance Broker.

Wade Henderson is a recognized Expert in the Business Finance World with over 13 years Experience in the Commercial Lending Field and a strong reputation for getting the deal done. Visit his Business Finance Website to put his experience to work for you.