Bank of America to Pump $5 billion into Small Businesses

After a meeting this weekend with President Obama, CEO Ken Lewis of Bank of America Corp pledged that the nation’s largest bank would do more for small businesses and reverse some of its declines. All in all Bank of America will expect to increase its lending by $5 billion to small businesses this upcoming year.

“Bank of America is determined to do our part to help the economy grow next year and reduce unemployment by making every good loan we can make,” Mr. Lewis said in a statement.

Mr. Lewis acknowledged the large role that small businesses play in the American economy and reaffirmed Bank of America’s commitment to supporting these businesses. Yet Bank of America’s lending dropped 90% in SBA backed loans this fiscal year to 308 totally $17.6 million compared to last year’s 3,354 SBA backed loans totally a $121.4 million. While SBA loans online compromise a small percentage of total loans to small businesses, it still is a strong indicator of market trends.

Bank of America experienced a 16% default rate on small businesses loans, as Ken Lewis was quoted referring to this bad debt – a “damned disaster.” That’s over $2 billion in bad debt in comparison to a 1% default rate with commercial loans to large companies.
Bank of America is the second largest small business loans bank, next to Wells Fargo, and according to the treasury department, ended September with close to $42 billion in outstanding small business loans.

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