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New small business loans approved in 'minutes'

Industry News

The new lending initiatives are aimed at getting relatively modest loans to small businesses quickly.

CNNMoney.com. | December 17, 2010

The Small Business Administration announced two new lending initiatives on Wednesday aimed at getting relatively modest loans to small businesses quickly.

The idea is to get loans under $250,000 into the hands of small businesses efficiently: Applications are only 2 pages long and can be approved in anywhere from "minutes" to 10 days, according to the SBA. Greater access to credit should help spur firms to grow and hire, giving the economy a boost.

"Many entrepreneurs and small business owners across the country have enormous potential to drive economic growth and create good-paying jobs in their local communities, but too often they face barriers in fulfilling that potential," said Catherine Hughes, chairperson of the SBA's new Advisory Council on Underserved Communities, in a written statement.

Banks have been slow to lend to small businesses, even as credit availability has eased since the global financial crisis hit. More than three-quarters of small businesses that applied for a loan during the first half of 2010 received only "some" or "none" of the credit they desired, according to a New York Federal Reserve report released in October.

Unlike big corporations, which can issue stock, sell bonds or take other measures to raise cash, small businesses are largely at the mercy of banks for financing.

But big banks have complained that it often doesn't pay for them to spend time and resources administering a small loan.

The SBA's new Small Loan Advantage incentive cuts the paperwork burden. Larger banks that are already so-called "preferred" lenders can make loans through its flagship 7(a) lending program up to $250,000, and get them approved quickly by submitting a single-page credit memo, according to Jonathan Swain, assistant administrator for the SBA.

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