The Key to Small Business Lending is Collateral
If you read two of the article titles in small business section of The Wall Street Journal (WSJ) this week, you might be a little confused about what’s really going on in terms of small business lending – “Banks Reach Out to Small Firms” and “Is Lending to Small Business Really Up?” What?
For the most part, things look like they are starting to turn in the world of small business lending. Bank of America reported that even though overall lending was down in 2010 from 2009, their lending to small businesses increased by $2 billion. And, there are many other loan-granting institutions that say their lending to small businesses is on the upswing.
The first WSJ article noted above even indicates that many banks are going out of their way to make loans to small businesses. “Bank of America Corp. has promised to add 1,000 small-business bankers during the next 18 months. This week, U.S. Bancorp began training employees at nearly all of its 773 branches in supermarkets on how to make small-business loans.”
However, there are a couple of things to keep in mind. For many of these banks, including Bank of America, their definition of a small business is one that is less than $20 million. And, even though many banks say they are looking to increase small business lending, they are looking to work with “highly creditworthy” businesses and companies that have a lot of collateral.
Banks are less likely to lend money without some security, which can be provided to some extent by tangible assets. They are conducting more careful due diligence, which includes their own certified appraisals of collateral to ensure that they will recoup their losses should a loan default. Having a defensible, impartial appraisal of your collateral in hand can help increase the chances of getting much-needed money for a small business.
Present Value LLC is a worldwide international appraisal and advisory company that provides a range of professional services such as Certified Machinery and Equipment Appraisals, Inventory Appraisals, Asset Verification Services, Business Valuations, and Real Estate Appraisals. Contact us today!
By: Present Value
Additional Reading
Collateral Proves Valuable for Businesses Seeking Loans
Small Business Jobs Act of 2010 Could Be Boon for Small Businesses in 2011
Who Needs a Certified Machinery and Equipment Appraisal? Part 2