The law of supply and demand has more of an influence on obtaining restaurant financing than you might think. The truth is that wealthy restaurant goers are experiencing the brunt of an economic downturn just like the rest of us. And this phenomenon is making it harder than ever to secure restaurant financing. But the SBA is taking some positive steps to unclog the process and help you get special purpose business cash.
Even the Wealthy Foreclose
Reuters recently described the plight of the wealthy as they struggle to make house payments and avoid foreclosure. Says Reuters: ‘Along with their less moneyed fellow citizens during the housing boom, many wealthy Americans leveraged their home equity to buy anything from a car to stocks.’ Of course, another unfortunate side effect is that fewer people are dining out--a point not lost on business cash lenders.
Obtaining restaurant financing was difficult in the first place. But as more banks raise their standards and ask more profit-related questions, the process has gotten even stingier.
The SBA Tries to Shake Loose
The Small Business Administration recognizes that venture capital funding must be made available if the economy is ever to return to its normal functioning. To that end, the SBA has made two distinct changes in applying for business cash that will make a real difference over the long haul.
1. An interim final rule allowing new SBA loans to be made with an alternative base interest rate, the one month LIBOR rate (London Interbank Offered Rate), in addition to the prime rate, which was previously allowed. This move makes programs more flexible, increases opportunities to access capital and gives both lending partners and small business customers more options to meet their needs
2. A new structure for assembling SBA loans into pools for sale in the secondary market. The enhanced flexibility in loan pool structures can help affect profitability and liquidity in the secondary market for SBA guaranteed loans
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