What are the best ways to use the bailout money? In terms of small to mid-sized business, the SBA offers viable solutions.
Did you know that the federal bailout package is authorized by the United States Department of the Treasury and is called the Trouble Asset Relief Program or TARP for short?
Here’s a suggestion from Chris Hurn, CEO of Mercantile Commercial Capital regarding federal bailout funds.
Use the federal bailout funds to incentivize banks to offer more SBA loans – The bailout is being criticized because the government is infusing banks with capital that they are using to grow their reserves and fix their balance sheets rather than lend to businesses and, thereby, create jobs and growth. The government should demand that a percentage of its investments in banks and lenders must go toward the financing of new SBA loans that offer the very best possible rates and terms to small businesses, so that these companies can continue to grow and create new jobs.
According to a Consumerist summary on the situation:
Washington told taxpayers a major rationale for us to fork over $700 billion to banks was to save the American economy by making loans more accessible, but it looks like at least at Chase they rather use it to buy other banks, the New York Times reports.
Times reporter Joe Nocera listened in on a Chase employee-only conference call and one employee asked, “Chase recently received $25 billion in federal funding. What effect will that have on the business side and will it change our strategic lending policy?”
Translation: When are we going to start making loans? The executive moderator replied:
“Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase. What we do think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop.”
Later, the same executive said,
“We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side.”
Translation: We’ll use that $25 billion as a war chest to buy other banks, and hoard it in case times get tougher.
“Read that answer as many times as you want,” wrote NYT, “You are not going to find a single word in there about making loans to help the American economy.”
Furthermore, a new tax break allows banks to immediately deduct any losses that are on the books of the banks they acquire.
Mercantile Commercial Capital is still liquid even in these trying economic times, give us a call if you are in the market and looking for an SBA 504 loan.