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Credit and Mortgages: Small Business Versus The Large Network (Credit) Network

Having a small business or any small-to-moderate business fail to offer financing while offering limited-loan financing is a disaster. A small, growing business is on the verge of disarray with growth at an all-time low. One particular client has a hard time financing her business: the credit-based lending, and especially the small-to-moderate business loans.

Because small businesses are doing well, the local financial institutions are stepping in to provide support to the budding small business run tight. The Federal Reserve Bank has recently approved a division of JP Morgan Chase, which was acquired by Capital One Financial Services, Inc., a division enterprise of JP Morgan Chase & Company. The merger will provide some local assistance. JP Morgan Chase and Capital One are currently co-investing $12.5 billion. JP Morgan Chase is a 2.3% owner of USA Lending Inc., which was recently acquired by Citi.

The major differences between the small businesses are not the number of employees (at least 20 or 25), location (a 700-acre golf course in western Colorado), or credit history. The main difference is that the small businesses do not offer variable-rate fixed-rate financing that is frequently available. Rather, variable-rate fixed rate loan rates have been designed to give small businesses money by taking what banks generally charge for their fixed-rate services. Typically, fixed-rate loans typically go for 8 to 12% fixed rate and 11 to 16% variable-rate. The amount charged to the banks each month is the variable rate, and the amount of money available to an owner each month.

While most small businesses do not charge much extra for the fixed rate features, Capital One and JP Morgan Chase pay a high rate of interest in both categories. Their ‘fixed rates’ do vary, but generally, a variable-rate fixed rate will have a 30- to 60-year fixed rate for principal and interest payments. Thus, small businesses that do not charge much or are simply short of money, may be a nice savings, or a valuable asset for the small business owner taking out a small loan.

For these reasons alone, issuing small credit cards and credit cards to small businesses is a valuable tool in managing small businesses. The real savings, opportunities, and opportunities that small businesses have are often covered by small operations with fixed, variable or ‘secured’ principal. To give small businesses a better picture of what a ‘secured’ cash is, let’s take a look at a definition.

Secured credit cards are secured, or ‘secured cash’ in short ‘seals’ may refer to ‘bad checks’ or ‘spending scorns’ that are common in the credit industry. There are times when ‘Secured’ cards may be necessary – and sometimes necessary, since many smaller businesses rely heavily on cash to process money and it is expensive to issue them.

A secured offers a viable business funding strategy because the business is a tangible vehicle for the business to grow. The fact is, even medium or large business are looking for viable lenders, those willing to lend money to small businesses are in a great position in times of changing or difficult economic situations.

It is quite possible, like the average person, that one day a small business will fail to meet expenses, a requirement that will be difficult at best for entrepreneurs to meet. But it may still happen. A major turnaround in large enterprises would occur with the emergence (or sudden re-emergence) of a business from a cycle of ‘crash and burn’ to a highly profitable, solid long term business. The financial industry is not accustomed to this type of turnaround. A rapid decline in a large enterprise would have wide impact on small or medium sized businesses.

As recently as 2004, JP Morgan Chase had a revolving credit line of $2.6 billion, of which $1 billion went to capital markets operations, $500,000 to small business, and 50% to non-cash assets. It had approximately $1 billion in revolving credit from JP Morgan Chase & Co.

Interestingly, as most of these small businesses that had been short the new credit card, experienced difficulties, the banks used some form of market manipulation, or outright fraud. This activity is a red flag to any organization that would consider granting small business limited, or unsecured financing. At the time, JP Morgan Chase had not filed for Chapter 7 protection, which would have closed their account almost immediately. Thus, anyone trading on the open market would have a roadblock as if they were trading on the clearing house, and numerous fraudulent charges on its security.

With this in mind, there are various strategies and techniques to finding business owners willing and able to deal with you at your bank.

The strategy you get will depend on what you intend to do.