Sam’s Club’s Risky Move Into Small-Business Loans

Last Updated Jul 7, 2010 9:37 AM EDT Sam's Club has struggled to compete with membership-club store leader Costco Wholesale (COST). Now it's busting a move, offering a business service Costco doesn't have -- small-business loans. With 15 percent of Sam's business customers reporting they were turned down for a bank loan in a study done last fall, it's a service that's clearly needed, but one that exposes Sam's Club to some potential problems. The company's announcement doesn't say how much risk exposure Sam's Club will be jave with the loans, which will range from $5,000 to $25,000. The division of Walmart (WMT) is partnered with Superior Financial Group in making the loans. But if Sam's is exposed at all, remember that in these tough times, loan default rates are high. These are likely high-risk lenders, too -- they've been turned down already for bank loans. Another risk factor: Superior isn't a bank. Small Business Administration. Last year Superior reported that due to the bank-lending slump, it had emerged as the top lender of SBA-backed small business loans. So the good news is Superior has deep small-business lending experience. But even if Sam's Club is deriving its income from the loan agreement purely from referral fees, the agreement carries another risk -- bad publicity, which could come from three different directions. One would be if many of its small-business loans go south, which could easily happen given the quality of borrower here. Another problem: Nonbank lenders don't have a good reputation. Basically, lenders such as Superior are lumped in the minds of many into the same category as payday lenders, currency exchanges and issuers of money orders. Payday lending in particular is a niche rife with abusive practices. Nonbank lenders have been drawing fire for not being subject to financial reforms as have traditional banks, even though some observers feel nonbank lending practices were just as bad in the bubble. Though historically most nonbank Continue Reading

Small-business loan OKs by big banks at record high

One thing that's critical for growth in a capitalistic economy is capital. Small businesses, which have created two out of three new jobs in the United States in recent years, are the companies with big capital needs. The good news is that big banks and institutional lenders are stepping up. In 2017, approval rates from these financial institutions hit record highs, according to the latest small-business lending index from online lending marketplace Biz2Credit, which analyzed more than 1,000 small-business loan applications. "The economy is performing well on many different levels. Christmas retail sales were up, unemployment remains low, and salaries have gone up a notch," said Rohit Arora, chief executive of Biz2Credit, as part of a report on the index. The big banks' approval rate of 25 percent of small-business loans represents a record high. What's even more eye-opening is that institutional investors such as pension funds have an approval rate of more than 64 percent -- another historical high. Smaller regional and community banks approve about 49 percent of their funding requests from small businesses. That level is still slightly behind the 50 percent level reached back in October of 2014, but historically strong. The reason for the strong performance among smaller banks is mostly because of the continued support of guarantees from the Small Business Administration, where smaller banks are most active. "This bodes well as we enter a new year," Arora said as part of the update. "It is helpful for young entrepreneurs, who might not have credit scores high enough for a traditional bank loan, that SBA-backed loans are available through big banks and smaller ones." Credit unions continue to be a significant part of small-business financing options, although the technology offered by their banking competitors is having an effect on their market share. Online and alternative financers also have a high approval rating, but their loans come with steeper interest Continue Reading

New York small business loan approvals trail only New Jersey

Small business owners in New Jersey and New York respectively are more likely to get approved for a loan than entrepreneurs in any other part of the country, according to a new study of more than 50,000 loan applications on over the last 12 months. Nearly one-quarter (23.4%) of entrepreneurs in New Jersey had their funding requests approved last year, while New York-based companies had about one-fifth (19%) of their loan requests approved. New Jersey-based entrepreneurs benefit from the unique combination of high average annual revenues and credit scores while thriving at the same time with its close proximity to New York and Philadelphia. High operating costs of businesses in New York City, which represented a large percentage of the loan requests, had an unfavorable effect on loan approval rates. However, New York-based companies typically have higher revenues and credit scores, and are in business longer, which helps combat the negatives throughout the application process. Companies in the New York metropolitan area had the highest average revenue ($979,674) and were the longest established (76 months). Additionally, business owners in New York had the highest personal credit scores (646). The city's growth has been fueled by the booming real estate market and construction industry, banking and finance, and New York's booming technology sector. Among the biggest surprises in the study was Illinois, which placed third among the top states for small business loan approval percentages. Despite recent reports of Illinois having the lowest credit rating of any state, companies based out of "The Land of Lincoln" had 15% of their loan requests approved. The booming technology sector is driving the local economy. The Top 10 states by loan approval rates are: 1. New Jersey (23.4%) 2. New York (19%) 3. Illinois (15%) 4. California (14.2%) 5. Pennsylvania (12.9%) 6. Florida (11.1%) Continue Reading

EDA, TD Bank offer new small business loan

The state Economic Development Authority and TD Bank recently closed the first loan under the New Jersey Advantage small business loan program with Carteret-based Aldo Design Group.To mark the loan closing, EDA Chief Executive Officer Melissa Orsen and TD Bank Market President Nick Miceli recently visited Aldo Design, a family-owned flooring and interior products outlet for retail and commercial customers and home-builders since 1972. The company received a line of credit for working capital and a loan to refinance an existing mortgage.“The financing provided by the New Jersey Advantage Program will improve our cash flow, allowing us to invest more in growing our business and finding even more ways to be the best resource we can to our clients,” President Albert Benavides said in a news release.The program is designed to provide financing to creditworthy New Jersey businesses committed to job creation and retention.The program offers loans and lines of credit financed by TD Bank up to $5 million, with a subordinate guarantee of up to 50 percent provided by the EDA. Companies benefit from optional fixed or variable below-market interest rates.“Aldo Design embodies the entrepreneurial spirit and perseverance of New Jersey’s small business community that inspired TD Bank and the EDA to partner to launch the New Jersey Advantage Program,” Orsen said. “Businesses like Aldo Design drive job creation and economic growth in the State, and have a ripple effect that leads to ancillary growth of other businesses.”TD Bank and EDA said they are working closely to bring the advantages of the program to other businesses.For information, visit Staff Writer Bob Makin: 732-565-7319; [email protected] Continue Reading

Weiner cheers huge rise in small-business loans

THE NUMBER of loans used to pump money into small businesses in Queens jumped 41% this year, according to a study released by Rep. Anthony Weiner. The study showed that more than $69million in loans went to Queens businesses in 2010, compared with $49million last year. The study looked specifically at small-business loans guaranteed by the federal government that are handed out by local banks. A provision in last year's stimulus bill increased the federal guarantee from 75% to 90% of the loan. "It seems like that has worked very well in making skittish banks make more loans to local businesses," said Weiner (D-Queens/Brooklyn). He pointed out that access to credit is "vital" in helping businesses stay afloat and expand during tough financial times. "Given what we are seeing, the fact that the banks are lending more money means they are getting into a more rational cycle, and that's good," he said. "This is the way things are going to get better." On Friday, Weiner visited with Kevin Kim, who secured a $1.3million loan to renovate and expand the Associated Supermarket he operates on Aguilar Ave. in Flushing. Kim created a new fresh fish department and upgraded the produce department. "Before, I had about 30 people working here," said Kim. "Now I have almost 70 people." Kim said the store also offers a larger variety of foods, including more fresh, perishable items. He said the changes would not have been possible without the 10-year loan, which featured an interest rate under 6%. "This is really encouraging for Queens and the city," said Jonathan Bowles, director of the Center for an Urban Future, a think tank that has studied the impact of small-business loans in the city. "For much of the past couple of years, even the most successful small firms were struggling to get the loans that could pull them through until the economy improves," Bowles said. "But there's still a long way to go. Many small firms are still struggling, and a lot more Continue Reading

How to get a small business loan

Getting a small-business loan in this economic climate can be tricky, but it is certainly not impossible with adequate preparation. When they make their decision, lenders will primarily look at your credit history, business plan, education and experience operating the kind of business you want the loan for, as well as the feasibility of the business. This guide will show you what you need to do to get a loan for your small business. Get your finances in order Write a solid business planLook for the right The Small Business Administration ( is a great resource for loan information. In addition, you may be eligible for the SBA guaranteed lending program, which helps lenders make long-term loans to small firms. The lender you select is a personal choice based upon the needs of your business.Choose the loan that's right for will compare rates so that you can find the credit line that is right for your business. Like a loan, you will pay this back with interest. Appendix: Writing a business plan that will land you a loan Executive summaryThis section introduces your business in about two to five pages. It is a very brief summary of your detailed business plan. If you are looking for investors, it is especially important that this part is clear and makes an impact - this may be the only section someone even reads. Make sure readers understand how your business is unique and how it will turn a profit. Write this section last, as it sums up all of your previous sections.The executive summary should include:*The basicsBusiness name, address, industry (e.g., retail), type (e.g., restaurant), founders' names, number of employees*Mission statement *Description of what the business will doThis includes products/services sold and target consumers.*Market/competitive analysis*Marketing/sales strategy*What the company has achieved*History/background of this type of business*Projected sales and profits*Revenue stream*Financial Continue Reading

Financing basics for small businesses

Proper financing of your small business is critical to its success, but it's not always easy to understand and execute smoothly. This guide will walk you through some of the major financing issues and questions you may face as a small business owner, as well as how to overcome them. Calculate your startup costsTo determine your startup costs, you must identify every single expense - from one-time fees to ongoing costs - your business will incur during its startup phase. Then you have to go through each expense and determine which are essential and which are not. This can help you see where you can cut the fat, should cash become a problem. For all essential expenses, separate them into fixed expenses (costs that do not vary with sales volume, such as rent, equipment, administrative and insurance costs), and variable expenses (those related to the sale of the product/service, such as inventory, shipping, packaging and sales commissions). There are numerous online calculators to help figure out startup costs. Try and Know your break-even pointOpen a commercial bank offers a list of banks, many of which offer commercial accounts. Opening an account is usually relatively simple. You will bring an ID, business registration papers, business license, funds with which to open the account, and other documents the bank requires.Understand basic accountingQuickBooks (visit offers a program that will not only track your bank account balances, but also create invoices, organize vendor/supplier account information, keep track of accounts payable and receivable, and more. It's advisable to at least consult an accountant before you start your business so you can get advice on the types of accounts you should set up, tax issues, common mistakes to avoid and other accounting tips. Balance sheet accounts Information from this section will help you create your balance sheet.a) AssetsIncludes cash, accounts receivable, Continue Reading

Chuck Schumer backs small businesses’ call for fed cash

The federal government should set up an emergency loan program to help small businesses hard hit by the credit crunch, Sen. Chuck Schumer said Sunday. RELATED: SURVIVING NATION'S SCRAMBLED ECONOMYAs banks tighten their lending policies and hike interest rates, many businesses have seen the credit lines they rely on to pay employees and buy inventory dry up. Under Schumer's proposal, the Small Business Administration would offer tens of billions of dollars in direct short-term loans. "The No. 1 problem that we face in this economic crisis right now is that credit is frozen," he said. "This plan will throw New York businesses the lifeline they need as the credit market drowns." He said the emergency loans would bequickly repaid once money from the$700billion bailout stimulates credit markets. Midtown barbershop owner Arthur Rubinoff, 33, said he'd welcome the opportunity to get a government loan. "For me to go to the bank, with this economy, I have no chance," Rubinoff said. He's not alone. The Federal Reserve reported that nearly two-thirds of banks saythey have tightened their lending standards for small-business loans over the past three months. "It will help a lot of people to bridge the gaps," said Gus Kassimis, 37, owner of Gemini Diner on Second Ave. "What good is it if they just bail out the big boys, and don't help out the heart of the economy, which is businesses like us?" Join the Conversation: Continue Reading

Grameen America lending women a hand with small business loans

After 11 months - and much doubt about its potential for success - a Queens group that lends money to the poorest New Yorkers has hit the $1 million mark. Grameen America, which reached the lending milestone Wednesday, provides loans for women to start or expand small businesses. What makes Grameen unique is that instead of calling bill collectors to go after overdue payments, Grameen relies on peer pressure. "To make the world poverty-free is a goal of Grameen," Shah Newaz, general manager of Grameen America, said in his cramped office, located above an Indian restaurant in Jackson Heights. "They are the bottom poor people. They don't have any access to any other lenders," he said. Grameen is the brainchild of Nobel laureate Muhammad Yunus, who came up with an idea in the 1970s to help fellow Bangladeshis out of poverty by providing microloans. The concept spread in the developing world, earning the organization and its founder the 2006 Nobel Peace Prize. Grameen began making loans to women in the U.S. in January, starting in Queens. Additional branches are planned in Brooklyn and Nebraska. Alida Ramirez, 31, a Venezuelan immigrant, got a $2,000 loan several months ago. She wanted to expand her business selling gold jewelry and bedding. "With this program I have more time with my daughter," she said. Ramirez, like most of Grameen America's 430 members, also has a second job. She cleans homes. Despite the boot-strapping appeal of the group, some experts have been skeptical of whether Grameen's model can work in industrialized countries. Unlike larger American micro-finance groups, Grameen closely follows its original model created for the developing world - relying on peer pressure rather than collateral. The group currently makes loans to women only. "It doesn't have the power [here] that it has in Bangladesh," said Jonathan Morduch, a New York University public policy and economics professor. "It's much harder to be an entrepreneur here. Continue Reading

Small business loans are specialty for

A couple of years into operating Whisk Culinary, Zak Groh liked what was happening with his business.Sales were rising and major Milwaukee corporations were being added to the list of firms ordering in-flight fare from Whisk Culinary, a caterer that makes meals and snacks for private jet passengers who appreciate fresh food, presentation and eco-friendly packaging.Groh, a chef and founder of Whisk Culinary, didn’t need a huge loan — only $20,000 in working capital to add staff and expand his kitchen operation in West Allis. However, because the company is in the food industry and the loan amount was small, it wasn’t attractive to banks, which prefer financing less-risky businesses and making larger loans.“I had been doing my best to put something together with traditional lenders, but being a food business, pretty much no one wants to touch you because you fall into the category of a restaurant,” Groh said.An accountant suggested he try, a young Milwaukee-based financial technology company that works with banks by handling the smaller business loans banks typically avoid.Groh applied at the website for a loan and soon was talking with co-founder Michael Adam, a former M&I Bank and Associated Bank lender, who wanted to know more about Whisk Culinary and the private aviation in-flight cuisine business.“It was an interview in the sense of what you’re doing, where you’re at and a little bit of my background,” Groh said.Whisk Culinary got a $20,000 loan, and since then, the company has seen annual sales quadruple to about $800,000, Groh said.Although it was the kind of loan banks eschew, it was right in the wheelhouse of at the end of 2013 by Adam,'s goal is to be the No. 1 referral partner that banks turn to when an existing customer or potential new business borrower needs a small loan that doesn’t fit Continue Reading