Small business loans adapt to survive credit crisis at Sams Club

a customer walking into sams club with a cart

Small business lending is adapting to the credit crisis at Sam's' Club, which announced a program for easy small business loans online to Sam's Club members. Flickr photo.

Small business lending is adapting to survive. Small business loans have been an endangered species during the credit crisis, a stubborn legacy of the financial meltdown, housing crisis and Great Recession. But small business credit is making a comeback in unconventional ways, even as a miserly banking industry holds back the U.S. economy as it tries to fight its way out of the recession. The latest innovator is Sam’s Club, which announced a pilot program to offer small business loans to its members.

Innovative small business lending

The credit crisis is holding back the growth, hiring and spending of businesses that Sam’s Club wants as customers. MarketWatch reports that Sam’s Club, a unit of Wal-Mart Stores Inc., is testing a program to offer qualified members small-business loans from $5,000 to $25,000 backed by the Small Business Administration. Small business loans will be offered online to Sam’s Club membership through a partnership with Superior Financial Group. Members who apply for a small business loan online from Sam’s Club get $100 off the application fee, a 20 percent discount and a 7.5 APR. Terms are locked in for 10 years.

Small business consumer spending stimulus

Sam’s Club decided to start offering small business loans online after a company survey of small business customers indicated that tight credit was cutting into Sam’s Club retail sales. The New York Times reports that just less than half of Sam’s Club membership is small business customers, accounting for just more than half of its revenue. So far about 200 people have applied for the SBA loans and about 45 percent have been approved. The company says it does not expect small business loans online to be a big moneymaker, though it earns $50 for each financed loan. The payoff is to get consumers spending more freely — Sam’s Club hopes.

Another small business loan innovator

Small business credit also is loosening at some banks. Last week JPMorgan Chase announced a program to stimulate small business growth and hiring. The JPMorgan Chase small business loan program isn’t as accessible as the pilot for Sam’s Club members, but it represents another oasis in the credit crisis desert. The offer includes lowering the interest rate by 0.5 percent on a new business line of credit for each new employee hired, for up to three employees, for the life of the loan. The offer is available for businesses that qualify for lines of credit up to $250,000.

Small business lending motives

The Sam’s Club small business loans online pilot is looked upon as an unusual move for parent company Wal-Mart. MarketWatch reports that Wal-Mart has been accused of harming small businesses with its aggressive pricing, scale and business methods. And a report at bnet said Wal-Mart chose Superior Financial, which is not a bank, as a partner because ongoing efforts to add banking to its resume makes the financial industry nervous.

Small business loan success story

But Sam’s Club small business loan customers like Michael Golata don’t care about the politics behind the program. Golata, a contractor in Louisville, Ky., for United Parcel Service, told the New York Times that he applied online for a $10,000 small business loan  at 7.5 APR and got the money in 24 hours. He bought a new truck, hired three drivers and went from billing UPS $3,000 a week to $8,000.

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