What the Big Banks Won’t Tell You About Business Loans


By Leigh Buchanan


An SBA-backed loan could be a great option for your business. But you can’t count on big banks to help you, new research shows.

Last year 2018, SBA administrator Linda McMahon told Inc. magazine that her agency is “the best kept secret in the country.” If entrepreneurs keep going to the wrong banks, it may stay a secret.

Large banks like Wells Fargo are often lauded as active Small Business Administration lenders. And, in fact, they do process a significant volume of SBA-backed loans, which offer entrepreneurs lower interest rates and down payments, and longer repayment terms than ordinary bank loans. But the large banks’ numbers are less impressive when compared with much smaller banks, some of which specialize in such loans.

After the recession, many large banks stepped away from small-business loans, although they have been returning to that business over the past few years. But small-business loans are less profitable and riskier than larger loans made to bigger businesses.

“Large banks don’t have to lend to small businesses to survive,” says Ami Kassar, CEO of MultiFunding, an Ambler, Pennsylvania, business that helps small and midsize companies find debt financing. (Kassar is also an Inc.com columnist.) That means some big banks are less likely to introduce and explain SBA-backed loans to clients, says Kassar. Since most small-business owners get lending information from their bankers, and many patronize local branches of large banks, they may never even learn such loans are an option.

To illustrate the disparity, MultiFunding recently conducted a study of SBA lending activity that uses the number of a bank’s branches as a proxy for its size and reach. Among the 10 largest banks based on assets, TD Bank generated the most 7(a) loans (the SBA’s most popular program) in 2017, with an average of three per branch. Wells Fargo ranked second, with an average of one SBA loan per branch in 2017.

“It’s important to note that SBA lending is only a portion of our total small-business lending, and retail branches are just one of Wells Fargo’s delivery channels to serve the lending needs of small business owners,” says Jim Seitz, Wells Fargo’s communications manager for small business and business banking. “Wells Fargo is committed to SBA lending in every market we serve, with a dedicated SBA lending team to meet the needs of small businesses across the United States.”

Bank of America ranked last among large banks on MultiFunding’s ranking, producing on average one SBA-backed loan for every 30 branches. Don Vecchiarello, a spokesman for Bank of America, also emphasized that the company is very active in the small-business market generally. He says the company’s SBA loan business represents just 5 percent of its substantial small-business offerings–and that it is a growing part.

“Since 2015 we have tripled the number of people we have working in our SBA group,” says Vecchiarello. “As far as the 7(a) product, in 2016 we have nearly doubled the amount of loan production.” The company is also a perennial top five lender in the SBA’s 504 program to finance the purchase of fixed assets.

Still, compare those results with three single-location institutions: Celtic Bank, in Salt Lake City, which approved 1,417 loans in 2017; Independence Bank, of East Greenwich, Rhode Island, which approved 1,141; and Live Oak Bank, in Wilmington, North Carolina, which approved 1,055. Several non-bank lenders, such as Newtek and Readycap Lending, also outperformed big banks.

Live Oak Bank, founded in 2008 to provide SBA loans to veterinary practices, is online-only, which MultiFunding counts as a single branch. Today, the company serves 19 vertical niches, and about 63 percent of its loans are SBA-backed.

“There are some industries where business owners have historically received SBA loans, and so in those industries they have a little bit more knowledge,” says Mike McGinley, group general manager for Live Oak Bank. “In our average industry, though, we have to do a lot of education.” Health care, accounting, and agriculture businesses are among those often in need of introduction to the SBA program. The company also created an online tool to significantly streamline the process.

For its part, the SBA has been trying to make its loan programs more visible. McMahon recently finished a tour of communities around the U.S., during which she promoted the SBA’s products and services, including the loan programs. And the agency launched an online tool to match small-business owners with SBA lenders. But “the SBA can’t really control what Bank of America does or does not tell their clients,” says Kassar.

Of course some small-business owners who know about SBA-backed loans choose not to pursue them because they’re put off by the paperwork.

“It can be a real pain in the rear end,” says Kassar. “But if you can get 10 years, rather than five years, to pay back a loan, and it takes you a few extra hours of paperwork, that is probably worth it.”

In the end, the message isn’t small-banks-good/big-banks-bad, says Kassar. Rather, it is find the right bank for you. That could be a large provider. “We are big fans” of SBA loans, says Tom Pretty, head of SBA lending for TD Bank, where 7(a)s make up 41 percent of small-business loan activity. “We go out of our way to show customers all the different options.”

Small-business owners should ask about a potential lender’s experience with SBA-backed loans and how many they approve, Kassar recommends. And avoid throwing in the towel too early. “Don’t assume that just because one bank did not mention the SBA or told you that you were not qualified that that is gospel,” says Kassar. “If you were told that by five banks, then that is probably not for you.”


This article was first published at Inc


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Job Creation Is The Real Key To Helping Working Families


By Carrie Lukas


President Obama dreams of an American economy in which all workers have ample paid leave benefits, maximum flexibility, and, of course, receive more than a living wage. Yet in making his case for this vision, in this oped that appeared in the Huffington Post in conjunction with the White House “Summit on Working Families,” the President—perhaps unsurprisingly, given his Administration’s economic record—seems unfamiliar with the costs associated with greater benefits, the tradeoffs that workers and employers must consider when creating compensation packages, and the sad reality that the biggest problem facing many Americans today isn’t that their jobs pay too little or offer too few benefits, but that they cannot find enough work at all.

Indeed, lack of employment, not low wages, is the biggest factor creating poverty today. According to the U.S. Census, in 2012 (the most recent data available), just under one-in-ten working age adults living in poverty had full-time, year-round work, while two-thirds had no work at all. Proposals to raise the minimum wage or increase mandatory benefits will do nothing to help these Americans who lack employment, even worse would make it even less likely that they find work.

The nonpartisan Congressional Budget Office estimated that the President’s proposed minimum-wage hike to $10.10 per hour would result in 500,000 fewer jobs nationwide. The President should at least acknowledge that there are tradeoffs that come from increasing employment costs and the availability of positions, particularly for those with the fewest skills and experience. Already American teenagers who are seeking those vital first jobs, which provide value and experience far greater than just their paychecks, are suffering from unemployment rates well in to the double digits. That problem is particularly pronounced for minority youths: Nationwide, the unemployment rate in March 2014 for African-American teenagers was almost double the rate for whites, a jaw-dropping 38 percent. A higher-minimum wage will make this problem worse.

The President doesn’t just want to require companies to pay higher wages; he also wants more generous benefit packages. He laments that too many workers lack the ability to receive time off for a school play, can’t work from home when a child is sick, or take leave for a new baby or to care for a sick loved one. He writes, “the United States is the only developed country in the world without paid maternity leave.”

First, this is a gross mischaracterization of the American economy and work world. The United States lacks a law that requires employers to provide paid maternity leave, but that does not mean that paid maternity leave and other leave benefits are non-existent in America. In fact, most full-time workers have paid leave benefits and make use of those benefits following the birth of a child. The Census Bureau reports on the leave practices employed by working women after giving birth: 56 percent of full-time working women used paid leave following the birth, 42 percent used unpaid leave, 10 percent used disability leave, 19 percent quit their job, and nearly 5 percent reported being let go (this adds up to more than 100 percent because some women used more than one category of leave). Part-time workers were more likely to quit (37 percent reported quitting their jobs) and had less access to benefits: 20 percent used paid leave, 46 percent used unpaid leave, and just 2 percent had disability leave.

Certainly this data doesn’t live up to the vision of all workers enjoying generous leave packages, but it does indicate that most businesses recognize the need for time off and believe it makes good business sense to provide such benefits, even absent a legal requirement. The President himself provides examples of companies that are models of family-friendly workplaces, but he misses that this is evidence that the market can encourage advancement in that direction and that one-size-fits-all government programs may actually discourage such innovation and flexibility.

The President should keep in mind that not all workers have the same preferences for benefits over take-home pay, and different jobs lend themselves to different kinds of flexible work arrangements. Government mandates, however well intentioned, prevent employers and employees from finding mutually beneficial arrangements. And while the President suggests that women would be the greatest beneficiaries of more aggressive government mandates, women also end up paying a high price in terms of lost economic opportunity. Supporters of family leave mandates often point to Western Europe as a model, but American women are far more likely than their European peers to be breaking glass ceilings. Undoubtedly, one reason why is that European business leaders know that women in their childbearing years are likely to disappear for months, even years, at a time, and therefore don’t consider them for leadership positions. That’s hardly a culture encouraging women to “lean in.”

The best way to ensure that people have the benefits and resources they need is to create an environment in which there are plentiful jobs. That way employers must compete for workers, and workers can select compensation packages that make sense for them. Sadly, that’s not the situation that we have in America today, and the President’s prescription for more government mandates and higher employment costs would take us farther in the wrong direction.

Carrie Lukas is the managing director of the Independent Women’s Forum and author of a chapter on work-family policies for YG Network’s Room to Grow.


This article was first published at Forbes


UN deputy chief addresses African Youth Development Summit in South Africa

By UN

“[The youth] know that for the sake of their future, we need to transform our economies and embrace new, sustainable patterns of production and consumption,” she added, noting that perhaps most damaging of all, “young people are witnessing the manmade destruction of our natural environment.”

Young people are the leaders and torchbearers the world “desperately needs” but they also face serious challenges when it comes to realizing their potential, the United Nations Deputy Secretary-General has said.

Addressing the African Youth Development Summit, in South Africa’s Johannesburg, Amina J. Mohammed said that young people “are seeing their pathways to participation blocked and their rights denied.”

“The youth know that for the sake of their future, we need to transform our economies and embrace new, sustainable patterns of production and consumption,” she added, noting that perhaps most damaging of all, “young people are witnessing the manmade destruction of our natural environment.”

Ms Mohammed, however, added that with the global 2030 Agenda for Sustainable Development and the African Union’s Agenda 2063, roadmaps exist for socio-economic transformations that can unite people and drive change at all levels.

And Young people are key to ensuring that happens.

“The Africa We Want will not be possible without the full participation and of Africa’s young people, particularly those who face barriers – including young women and girls,” said the UN deputy chief.

In her remarks, the Deputy Secretary-General highlighted the UN’s work with and for the world’s youth, including the recently launched Youth2030, the Organization’s Youth Strategy, as well as the role of Jayathma Wickramanayake, the Secretary-General’s Special Envoy for Youth.

On the specifics of Youth2030, Ms Mohammed spoke of programmes focusing on climate action; education and health; as well as campaigns promoting better sexual and reproductive health, and menstrual health; noting that the latter had “been a taboo subject for far too long.”

Lack of support for menstrual health can keep girls out of school and the workplace and out of leadership roles, with devastating consequences that can last lifetimes and across generations as well as leading to discrimination and marginalization of women and girls, said the Deputy Secretary-General.

“Educating both girls and boys about menstruation as a normal biological process is the first step towards addressing these issues,” she highlighted.

Be the change

Concluding her remarks, Ms Mohammed, had a message for youth everywhere.

She said that she is “counting” on them to be the change agents and torchbearers “that we so desperately need.”

“The dignity that we want for our young women and men begins with each and every one of us. It will be a journey, the outcome of which will depend on how you travel that road to 2030,” she said.

Source – Devdiscourse