Daily Observation - It's OK to Pay More

If you remember Gordon Geko from Wall Street staring Michael Douglas and Charlie Sheen making his speech to Toldar Stock Holders, Greed is Good, well we are there again. Tonight we continue looking at the changes the SBA is making and the reason for it. As I have been writing about all week, LIBOR is now the new rate of choice for SBA Lenders.

For more on SBA Financing and what this really means visit loanforbiz.com and request our 10 FREE Special Reports which will help you get your loan closed.

But what I have not shared with you till now is the real reason why the lenders will come back to the market. GREED, Yes GREED with a capital "G". If we look at how the lenders fund loans it will become very apparent. Most of the banks are paying LIBOR rates for their cost of funds. So if they can now charge 300 basis points greater than LIBOR and on top of that they can add their spread, its no wonder the secondary market will return.

Now I'm not trying to insinuate that the lenders are not trying to stimulate the economy by lending again, but they are certainly not doing this to be altruistic. Lenders are in the business of lending money and if they can lend their money and make a profit then I say good for them, but more importantly good for us.

I want to close tonight's blog with a snippet from Entrepreneur's Magazine INC.

"The upshot for borrowers is that they'll have to pay more. But in the SBA's view, that's OK. "The challenge small businesses face today is not the cost of capital, it is access to capital,” Acting SBA Administrator Sandy K. Baruah said in a press release. “Interest rates are at historically low levels meaning money is inexpensive, yet lenders aren't lending and borrowers aren't borrowing. This indicates markets are frozen due to liquidity concerns."

Not surprisingly, the downturn seems to have had a greater impact on start-ups, though only slightly so: their share of total SBA loan dollars has fallen a few points, while existing firms' share has grown...."