New Plan to Increase Bank Lending: Will it Work?

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The Small Business Administration is set to put a new plan in action, in attempt to boost bank lending to small businesses.

Through this plan, the SBA will guarantee up to $3 billion in pools of banks’ 504 loans sold into the secondary market, according to Business Week.  This is in an effort to relieve banks’ fears of borrower defaults.

The 504 loan program is designed for small business owners who want to acquire real estate or equipment for expansion or modernization.  Therefore, it is hoped that focusing on this program will allow small business owners to expand their businesses and create more jobs.  Still, there are a couple of setbacks and concerns regarding the plan, according to the Business Week article, making it necessary for small business owners to continue to keep an open mind to bank loan alternatives such as the merchant cash advance.

1. Even an 80% guarantee may not be enough to lure lenders back.
2. “…TALF’s [Term Asset-Backed Securities Loan Facility] expiration could slacken demand and reduce the premium lenders get for their SBA loans, which in turn means less incentive for banks to make the loans to businesses.

Expansion is one of the top uses of the merchant cash advance and with the opportunity to receive up to $500,000 in business funds, small business owners can choose to expand their businesses however they choose.  Whether you want to open an additional location or increase the products and/or services that your business offers, you have an opportunity to create jobs and rebuild the economy with a merchant cash advance.