Analysts Ratings: CIT Group (NYSE: CIT) and Advanta Woes Lead to New Federal Small Business Loans
During the last several months, it’s been very difficult for small business and entrepreneurs to borrow money because of major business lenders such as Advanta and CIT Group (NYSE: CIT) shutting down or facing severe financial problems.
As a result, President Obama has redirected the remaining TARP funds to smaller banks and small businesses. The new federal initiative through the Small Business Administration may provide operating capital when funding may have been otherwise unavailable.
According to the U.S. Senate Committee on Small Business & Entrepreneurship, The SBA will begin offering an increase in the maximum 7(a) loan to $5 million (up from a maximum of $2 million). The SBA will also offer an increase in the maximum 504 loan to $5.5 million (up from a maximum of $1.5 million and an increase in the maximum micro-loan to $50,000 (up from a maximum of $35,000)
Small businesses have been the engine for innovation and economic growth for the last two centuries in the United States. The majority of Americans work for small businesses, but the majority of the stimulus money so far has been sent to large, national corporations. The Obama administration is now focusing their efforts on small businesses by encouraging them to continue to grow and innovate with new financing options.
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Great post but complicated to understand since I am from Faroe islands ;-) 
What would be your top three tips for anyone new to this topic?
The SBA 7a loans provide financing to business that cannot get financing through traditional means (i.e., their banks turned them down). I'm not saying the SBA program is a bad thing….but the government is providing a guaranty of up to 75% on a loan that is already deemed very risky, and now they are upping the investment by more than double…TARP funds will now officially never be repaid.
Let's see, the government borrows money to sponsor guarantees on these loan originations in case the loan defaults and the bank just invents the money to lend out on their balance sheet. The bank, loans out their newly “printed” money to the small business at interest. What part of this is helping the small business? We pay interest on top of the loan to a bank that is federally allowed to just invent money to give away. So the bank either ends up with your property, the federal government's guarantee or the principal + interest. Who's really winning here? What's the business end up with? Bankruptcy & destroyed credit or a purchase that cost them nearly twice as much as they could have paid if they just paid cash.
Credit is NOT the answer for repairing the economy; the multiplier effect works only to lend out more money (at interest of course), but it's impossible in a system with limited money supply to pay back every loan that inflated the money + interest. In such a system, there is a guaranteed level of default that MUST exist and it's tied to interest rates.
This banking system is terrible, using credit to solve social economic issues is a great (repeated) mistake.
The SBA 7a loans provide financing to business that cannot get financing through traditional means (i.e., their banks turned them down). I'm not saying the SBA program is a bad thing….but the government is providing a guaranty of up to 75% on a loan that is already deemed very risky, and now they are upping the investment by more than double…TARP funds will now officially never be repaid.
Let's see, the government borrows money to sponsor guarantees on these loan originations in case the loan defaults and the bank just invents the money to lend out on their balance sheet. The bank, loans out their newly “printed” money to the small business at interest. What part of this is helping the small business? We pay interest on top of the loan to a bank that is federally allowed to just invent money to give away. So the bank either ends up with your property, the federal government's guarantee or the principal + interest. Who's really winning here? What's the business end up with? Bankruptcy & destroyed credit or a purchase that cost them nearly twice as much as they could have paid if they just paid cash.
Credit is NOT the answer for repairing the economy; the multiplier effect works only to lend out more money (at interest of course), but it's impossible in a system with limited money supply to pay back every loan that inflated the money + interest. In such a system, there is a guaranteed level of default that MUST exist and it's tied to interest rates.
This banking system is terrible, using credit to solve social economic issues is a great (repeated) mistake.
The SBA 7a loans provide financing to business that cannot get financing through traditional means (i.e., their banks turned them down). I'm not saying the SBA program is a bad thing….but the government is providing a guaranty of up to 75% on a loan that is already deemed very risky, and now they are upping the investment by more than double…TARP funds will now officially never be repaid.
Let's see, the government borrows money to sponsor guarantees on these loan originations in case the loan defaults and the bank just invents the money to lend out on their balance sheet. The bank, loans out their newly “printed” money to the small business at interest. What part of this is helping the small business? We pay interest on top of the loan to a bank that is federally allowed to just invent money to give away. So the bank either ends up with your property, the federal government's guarantee or the principal + interest. Who's really winning here? What's the business end up with? Bankruptcy & destroyed credit or a purchase that cost them nearly twice as much as they could have paid if they just paid cash.
Credit is NOT the answer for repairing the economy; the multiplier effect works only to lend out more money (at interest of course), but it's impossible in a system with limited money supply to pay back every loan that inflated the money + interest. In such a system, there is a guaranteed level of default that MUST exist and it's tied to interest rates.
This banking system is terrible, using credit to solve social economic issues is a great (repeated) mistake.