TARP Money for Small Business Loans

U.S. Senator Benjamin L. Cardin proposed a bill that would provide direct loans to small businesses.  The bill proposes to use $20 billion in TARP money on small businesses.  TARP program was initiated by the Obama administration and is largely accredited with saving large US banks from bankruptcy.  The bill would also create a tax credit for small businesses with up to 25 employees offering health insurance to staff.

The legislation comes through as many small businesses which have made it through the economic recession are attempting to climb back on their feet by unsuccessfully accessing money through local and large banks.  The funding for the program would come from implementing temporarily a surcharge on individuals with incomes over $500,000 and couples over $1,000,000.

It doesn’t seem that the real problem in today’s economy is a lack of money.  Banks have received billions of dollars in bailout money.  Rather than a shortage of money, it seems more likely that large institutions are simply mismanaging their money, and in addition are not interested in investing in small businesses as they are riskier investments.  We saw this past year that corporate America was bailed out by the government, but small businesses were allowed to go bankrupt.  A bank’s investment is far more secure with a large institution.

For this reason we will see a growth this year in merchant cash advances.  A merchant cash advance provider will loan a lump sum of unsecured cash to a merchant who is processing Visa and MasterCard sales.  The merchant  pays a flat rate fee for the money which is typically more expensive than a traditional bank loan.  The lender collects his money back by taking a percentage of the merchant’s Visa and MasterCard sales.

To learn more about merchant cash advances click here!

To read the original Baltimore Business Journal article click here!

For more information about small business loans