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Susan Armstrong and her husband, Ray, run a $1.5 million (sales) roofing and construction company in Pinckney, Mich. After 23 years in business the couple relies on a patchwork of bank lines and credit cards, with interest rates from 12% to 15%. When the housing market crashed in 2008, the Armstrongs began looking for a loan, backed by the Small Business Administration, which would allow them to consolidate at a lower rate.
Two months ago Ray Armstrong entered his contact information on a website that looked like it was affiliated with the SBA. The next day he was contacted by a representative from a South Jordan, Utah outfit called Funding Universe. The rep said that for $99 Funding Universe would assess the Armstrongs’ financial situation and connect them with one of the company’s consultants. After reviewing the initial workup the consultant said he would pair the Armstrongs–for an additional fee of $2,600–with an appropriate lender and prepare their loan application. “He said that we were in a very good position to get this loan, and it shouldn’t be a problem,” says Susan Armstrong. “They told me everything I wanted to hear.”
After putting the fee on one of her credit cards, Armstrong says she came across scores of complaints from Funding Universe clients who claimed the company was a scam. Alarmed, she tried to cancel her order the next day. After a week of back and forth on the phone, the consultant told her she could get a 75% refund. She says she hasn’t heard from the company since. “I just want my money back,” she says. Read the rest of this entry »
by Marshall Kirby, Public Policy Analyst
By and large, Americans utilize credit for a sizable percentage of all transactions. Whether it is mortgages, auto loans, student loans, personal loans, or credit cards, financing purchases is a simple fact of the current economy in the United States. There has been a lot of news during the recession about bank bailouts under TARP, high foreclosure and default rates, individuals and families immersed in credit card debt, and lack of credit available to businesses. Legislation has been passed regarding credit cards for consumers and the Obama Administration has attempted to extend lines of credit to businesses through the Small Business Administration and has urged banks to lend to qualified businesses. Despite the pleas and lines of credit available to businesses and entrepreneurs, it still has not been adequate to address the needs of business owners and managers to finance their growth and operations.
Enter credit cards. Despite the credit card reform act which was enacted in 2009, credit card companies appear to be expanding their efforts to extend lines of credit to businesses. Credit card companies under the CARD Act (Credit Card Accountability, Responsibility, and Disclosure) were forced to give relief to consumer card holders from excessive fines, fees, and interest rate hikes. As a result, many card companies have reduced consumer credit lines and have enacted more stringent lending practices which have lowered overall access to credit. However, there has been no legislative equivalent to the CARD Act for business credit cards. In fact, in October 2010, the Federal Reserve announced that neither they nor the Federal government will attempt to enact the same protections for business credit cards. Read the rest of this entry »
posted at Chamber of Commerce.com:
An idea proposed in last year’s State of the Union address, the Small Business Lending Fundproposed by President Obama in early 2010 is finally getting off the ground. The number of loans being given to small businesses has been on the decline since 2008, leaving tens of billions out of reach for businesses around the country. But the Small Business Lend Fund looks to remedy this downshift, with $30 billion being injected into community banks to jumpstart the small business lending scene that’s been in a slump for quite some time.
Response from banks has been strong, which is good news for businesses looking for loans. That said, however, the new fund may not be as effective as Congress initially hoped. Certain Congressional reports implied that banks would lend $10 for every one dollar in received capital, resulting in $300 billion worth of loans. These figures seem rather optimistic and there’s doubt that demand is that high for such loans.
The success of the fund depends heavily on the responsibility of banks, and soon enough we’ll discover whether or not they’ve learned their lessons in regards to distributing poor loans. Banks eligible for the Small Business Lending Fund must have less than $10 billion in assets, and it’s estimated that over 100 banks have already applied. The application deadline for the fund is March 31st, so there’s still time for more banks to get on board. Read the rest of this entry »