The door to the bank vault at a Wells Fargo bank. (AP Photo/Jeff Chiu) photo credit: ASSOCIATED PRESS
SBA Loans help spur small business lending. The government guarantees on the loans make them very attractive for regional and community banks. It’s a very positive sign that approval rates continue to climb above the 50% benchmark.
“The SBA loan guarantee encourages lenders to say ‘yes’ to small business owners who might otherwise be turned down under the banks’ own underwriting criteria,” said SBA New York District Director, Beth Goldberg. “Thousands of jobs and hundreds of millions of dollars enter the New York economy with the help of SBA’s loan guarantee.”
Goldberg added that through August of FY2019, 32 lenders have made SBA guaranteed loans in the New York District that did not participate in the program last year.
Additionally, institutional lenders are playing an increasingly important role in small business financing. Their approval rates rose one-tenth of a percent to 65.8% from July’s figure of 65.7%. They, too, lend at attractive interest rates.
The Federal Reserve will mull over another interest rate cut that could result in another one-quarter point drop in the cost of capital. The Fed’s next policy meeting is scheduled for September 17-18. Lower interest rates, naturally, are good for borrowers.
However, even if no change is made, interest rates are attractive right now. If someone has been sitting on the fence waiting for a lower rate, it might not ever come. Do not expect rates to drop to near zero as they were a couple of years ago. Anyone looking to borrow money should consider starting the process now while rates are low and the economy is strong.
While bank lending is robust for small businesses that have good credit scores, those who cannot qualify for traditional bank loans or SBA loans still have a viable option with alternative lenders. While non-bank lenders’ approval rates dropped two-tenths of a percent to 56.6% from 56.8% in July, still more than half of applicants secured funding. Alternative lenders typically strike deals with companies that banks have rejected.