Traditional Business Loans

I’m often asked by bankers and borrowers if there are any traditional business loan programs still functioning in the current credit environment. The answer is yes, they do still exist; however, most lenders are utilizing government guarantees on as many loans as they are able. This is especially true of the community bank and credit union environment. I haven’t seen the portfolio’s for these lenders to see what the percentage of traditional conventional business loans vs government guaranteed, but I have seen many more guaranteed loans fund over the last two years.

The government guarantee limits the risk for the lenders. It helps the lender get comfortable with risk prone loans like start up and acquisition requests. There is also a significant amount of upfront revenue for lenders in the secondary markets for guaranteed loans. Limiting the risk and more immediate revenues are an attractive incentive for lenders to originate guaranteed loans over conventional.

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