Supply of credit worthy small business borrowers is down

A bill intended to help smaller banks make more loans to smaller businesses is about to be voted on by the U.S. Senate. The bill is intended to create $ 300 billion worth of small company capital. The businessman within the lending business are saying this quick cash advance won't help create more loans for small business. Businesses say that credit-worthy small business borrowers are simply in short supply.

Lending for small businesses

If the Senate passes this bill, $30 billion could be "injected" into community banks. That cash is intended to create $ 300 billion in small company loans. This cash is intended as an emergency money for jobs and small business credit. The cash would be available for banks with assets of less than $ 10 billion. This bill is supported by both the National Federation of Independent Business and the American Bankers Association.

Smaller businesses lack credit

Large banks are saying that small businesses may not benefit from this lending bill. Many banks are skittish about lending to people with poor credit, because that is what caused the recession in the first place. The highest demand for loans, especially for small businesses, is from borrowers who have a bad credit score. Until they’re seeing sustainable profitability, many companies don't want to borrow any money.

Financing small business means risk of default

There are a number of indicators that say that smaller businesses are in need of more than just loans. Loans that are guaranteed through the Small business Administration have been defaulting at a rate of almost a full 7 percent. Bank of America has reported that 14 percent of small company loans were charged off already this year. After half of its accounts went into default, a business that specialized in offering small business charge cards had to declare bankruptcy.