Who Should Fund Small Business Loans?

Small Business Loans

The economy has seen some serious ups and downs in the recent past. We are still slowly recovering from a significant recession. Part of that recovery plan included increasing funding to programs, such as the Small Business Administration (SBA) to encourage lending. Although most of their programs are not directly lending to companies (the exception being disaster relief funding), the SBA’s contribution does reduce risk a great deal. It also costs a fair amount in taxpayer dollars, as well. So, should we be paying for these programs? If not, who should be paying for small business loans? We’ll discuss this, in today’s article.

The argument in favor of the SBA and their programs backing small business loans is simple: If we strengthen small business, then we strengthen America. This isn’t a bad idea in principle, but we should ask ourselves some important questions first.

First, why are these companies unable to get funding through private capital markets? The short answer is that loans to new companies, entrepreneurs, etc. go unpaid far too often. In fact, certain companies that were furnishing such loans went bankrupt during the housing and subsequent banking crisis. In short, they aren’t getting money because too many of them don’t pay it back.

So, if so many of them don’t pay it back, and it costs too much money, what would be the possible advantage of these federal programs? To answer this question you must shift your perspective somewhat. Take a step back from the individual loans and companies to ask yourself, Is there value in experimentation? Think of each of these well-intentioned ventures as an experiment. Some will fail and some will succeed, but how can we find out which will be successful if we don’t fund any of them?

For more information, go to Small Business Loans at http://www.unsecuredbizloan.com/small-business-loans/

Who Should Fund Small Business Loans? was last modified: October 12th, 2011 by Amit Kraidman
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