New Small Business Lending Bill – How It Works for Small Businesses

For those small business owners wondering whether the winds of change from Washington will ever affect you, there is finally good news. The Senate, in its infinite wisdom, on September 14th, by a vote of 61 to 37, passed a motion which had the effect of approving the Small Business Jobs and Credit Act of 2010 (also known as the Obama Small Business Loan Bill). Since September of 2008, small business owners have been driving by local banks and not even turning their heads. There was simply no reason. For all intents and purposes, lending came to a screeching halt. Now there is a chance that lending machine will be fired up again.To understand the significance and the benefit to small businesses, here is a description of how it works. In summary, the U.S. Treasury will loan up to $30 billion to smaller community banks at rates between 1% and 5%, and the money will in turn be loaned out to businesses after an interest write-up for reasonable profit. Presto–businesses can now make realistic applications for loans. Here is how it works under HR 5297:1) Security for the loans from the Feds to the Banks. The Feds will not just hand out the money, but instead will require some reasonable security. Under section 103 (b), the bank will have to give up either preferred stock (stock with no voting rights) or issue a promissory note as a debt that will have to be repaid at a certain interest rate.2) How the Fed gets paid back. The Fed will receive either interest paid by the lender on a loan or dividends if there is preferred stock. Even better, the government can sell the promissory notes on the secondary market. This is almost as if the Feds are going into the lending business.3) Pays for itself. Well, at least that is the idea. This is because of the bad press from TARP I which was basically a giveaway program without strings. The idea is the interest and dividends will pay back the money advanced by the US Treasury. We will have to see about that.4) Bank lending plan. Under Section 103(d)(1)(E), each participating lender must submit a “Small Business Lending Plan”. This will describe how it will lend out the money and most importantly, have an outreach program where people are informed of the loans and how to apply.5) Lender websites. As to lenders which have web sites (and they all do), they must indicate they are a participant in the program and they are “seeking to make small business loans to qualified businesses”. In other words, get the word out.6) Lender quarterly reports. Each lender must issue a quarterly report of the number of loans made so their credibility can be tracked.It has been a long time coming. Hopefully, this will open the floodgates of capital again to small businesses which are primarily responsible for driving our economy.

Small Business Credit Cards Advantages

A lot of people associate credit cards with just personal credit card which an individual posses and uses for shopping etc. However, there is another category of credit cards and that is called small business credit cards. As suggested by the name itself, the small business credit cards are meant for small businesses or people running small businesses.So how does the small business credit card differ from the other credit cards in general?The very obvious difference is that small business credit cards have the credit account in the name of the small business and not any individual, though the benefits indirectly accrue to the business owner. The other difference is with the terms and conditions that come with the small business credit cards. Finally, there are some subtle benefits with small business credit cards which would not be applicable to personal credit cards. Let’s check all these things one by one.We know that the credit cards provide a lot of convenience and security for an individual and a lot of other benefits too. Most of the benefits related to personal credit cards apply here too. What is interesting here is the indirect benefits that ensue from using a small business credit card.The indirect benefits associated with small business credit cards are so great that it makes them almost indispensable. The most important benefit is that you can easily segregate your business and personal expenses. So if you have been wasting a lot of time keeping track of your business bills and trying to keep them separate from personal bills, small business credit cards could help. You just need to ensure that you always make all your business payments using your small business credit card. When the credit card bill comes at the month end, you will have itemized account of all the business expenses as a single document. Thus small business cards reduce (and in some cases completely remove) the need for bookkeeping for a small business. The credit card company does that for you for free, although indirectly.Another important benefit comes from rolling credit. If you have to pay for your purchases upfront and still invoice your clients later (a situation faced very often with small businesses), you can roll the credit, you are providing your client with, to your credit card. Moreover, since these purchases are mostly urgent, arranging for money immediately can sometimes be a problem. In such cases, the small business credit card is the one which can bail you out. Well, if you are thinking that your personal credit card could do the same for you, you are a bit off the track on two fronts. Firstly, you want to keep your business expenses separate from your personal expenses and secondly, the APR on business cards is generally lower as compared to personal credit cards. A lot of the small business credit cards don’t require you to pay an annual fee even.So if you run a small business but haven’t got a small business credit card yet, it’s about time that you considered this wonderful option.