Old-fashioned business loans going bad. Lenders attacking the personal credit of borrowers. The bottom of the credit crises seems not to have one. Here’s a quick and dirty summary of the latest business loan news and a glimpse of hope provided by a new stimulus program piloted by the federal government.
Bank Lows Hit Record Highs in First Quarter 2009
Bad news continues to dominate the financial landscape. The New York Times reports the overall quality of American loans is at its worst in 25 years. What’s more, they’re deteriorating at an unprecedented rate. Distressed loans make up 7.7.5 percent of all loans and leases at all banks. And the double-edged sword means that banks are becoming increasingly hesitant to offer the additional loans that could pull us out of the predicament.
Lenders Begin Taking Debts a Bit Too Personally
Traditional banks refusing to lend out more money is one thing. But when they begin attacking personal credit profiles in an effort to secure repayment, the financial landscape becomes downright dangerous. A BusinessWeek report outlines new bank practices that dictate responding to delinquencies by reporting to the consumer credit bureaus. In defense of the lenders, most business loans operate under the understanding that some personal responsibility exists for repayment. But it’s certainly something to keep in mind when seeking financing.
On a Lighter Note--Government to the Rescue?
Starting in the middle of June, struggling businesses can apply for up to $35,000 in emergency funding dubbed ARC loans. The loans are open to business with at least 2 years and have shown some level of profits. In other words, start-ups are not invited to the party. However, the stimulus package features interest covered by the government and a five-year repayment schedule.
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