Chase cuts rate on small businesses loans for companies that hire

J.P. Morgan Chase is cutting small business loan interest rates for companies that hire new employees as part of an effort to lower the unemployment rate. Flickr photo.

Small business loans may start getting more affordable, and the U.S. unemployment rate could be affected. The nation’s second-largest bank announced Wednesday that it will lower the interest rate on small business lines of credit for companies that hire new employees. Small business lending has been a hot button issue as credit dried up while banks were bailed out by the government. Banks have resumed raking in billions while small business continues to struggle and unemployment remains high. Public pressure may be finally starting to have an affect on loosening credit.

Small business loan hiring incentive

Small business hiring incentives from J.P. Morgan Chase & Co. include lowering its 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. Zacks.com reports that J.P. Morgan will also provide discounts to small businesses for opening checking accounts. In addition, J.P. Morgan plans to hold conferences in 11 cities across the country to assist local and small business owners to improve their sales figures and fund their businesses.

Banks ready to loan, are small businesses ready to hire?

During the economic downturn, politicians and the public at large have scorned banks that received government assistance, yet refused to make small business loans to help reduce unemployment. The Wall Street Journal reports that bankers have offered the excuse that there’s not enough demand from credit-worthy borrowers. And its true that losses from small-business loans have been severe at major small-business lenders. But Kevin Watters of J.P. Morgan Chase told the Journal that the economic outlook among small business owners has improved and small businesses are ready to expand and hire.

Other banks offer small business help

Several banks have started to  make more small business loans. J.P. Morgan said first-quarter loans to small businesses rose 31 percent from a year earlier, to $2.1 billion. The nation’s largest bank, Bank of America, reported that small business loans rose 18 percent from a year earlier to $19.4 billion. Many banks, including J.P. Morgan, U.S. Bancorp, PNC Financial Services Group Inc. and Capital One Financial Corp. have been giving rejected small-business loans a second look. Two years ago U.S. Bankcorp started training about 3,000 bank managers about small business lending.

Chase keeps its word on small business loans

The J.P. Morgan Chase offer to cut its interest rate for companies that hire new employees is available for business lines of credit up to $250,000. MarketWatch reports that the offer is also available for existing customers who hire new employees to increase their lines of credit by $10,000 or more. Chase business checking customers will receive an additional half percent discount on their loan rates for hiring new employees. The offer makes good on a promise J.P. Morgan Chase made late last year. The bank announced it planned to increase its lending to small businesses by $4 billion in 2010 to a total of $10 billion through access to working capital, term loans for expansion, commercial mortgages, lines of credit and business credit cards. It also pledged to hire 325 additional business bankers.