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IBloombergI Small biz cant get loans from bailed-out banks
NEW YORK (9/17/10)--The plight of small business owners who can't get loans from large banks that were bailed out during the financial crisis is spotlighted in Thursday's Bloomberg. Although the item doesn't mention credit unions' efforts to serve members with small businesses, it describes the need for more small business lending. Small companies created 64% of net new jobs the past 15 years, according to the Small Business Administration, Bloomberg reported. A record 41% of small business owners say they can't get adequate financing, said the National Small Business Association. New small business loans dropped 33% last year to $191.6 billion, the lowest since 2000, said the Federal Financial Institutions Examination Council. Outstanding loans fell 16% as of June 30 when compared with June 30, 2009, the article reported. It pointed out that Wells Fargo & Co., JP Morgan Chase and Bank of America received a combined $189.3 billion in the government's Troubled Asset Relief Program (TARP) and debt guarantees from their regulator, the Federal Deposit Insurance Corp. (FDIC). Two of the banks refused to make a loan to a small businessman who wanted to hire a dozen people with a $1.1 million loan. The third bank offered less than 70% of what the applicant needed. All in all, the businessman tried 17 lenders in 2008 and 2009. Although the banks say their small business lending increased the first six months of 2010, they define small businesses as those with annual revenue of less than $20 million. The Bank of America, which noted a 1% increase in small business lending during the first half of the year to small and mid-sized businesses said 80% of the loans went to companies with more than $20 million in sales. Although the bank claimed there is weak demand from the smallest businesses, Justine Petersen, a nonprofit microlender in St. Louis, said that's because entrepreneurs are frustrated with lenders and have given up asking for money. The lender said it is experiencing "unabated demand" for the loans, Bloomberg reported. Credit unions backed a recent amendment in Congress to raise their member business lending (MBL) cap to 27.5% from 12.25%, to infuse $10 billion into small businesses and create 100,000 jobs the first year at no expense to the taxpayer. However, the Small Business Jobs and Credit Act, which passed the Senate this week, does not include the amendment. Instead, it would provide $30 billion to encourage more bank lending without the MBL provision. The bill does have provisions of interest to credit unions, such as higher Small Business Administration (SBA) loan limits, increasing SBA 7(a) loan limits to $5 million from $2 million, raising 504 loan limits to $5.5 million from $1.5 million, and increasing 7(a) "Express Loans" to $1 million from $300,000. The bill also ups the definition of microloans from $35,000 to $50,000. (See related story, "Small biz jobs bill approved by Senate).


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