SBA Writes Off $2.1 Billion In Small Business Loans

Earlier this week the Associated Press reported that our Federal government bought over two billion (that's billion with a big B) in small business loans that have gone bad (that's bad with a big B). This is quite a big jump from from the previous year where the Small Business Administration bought back $1.3 billion in bad loans from banks. For the full article please visit AP.

An analysis conducted by the Associated Press found that the time between loan approvals and loan defaults is narrowing. According to the analysis:

More than $235 million in restaurant loans have been charged off since 2007. The 2,586 restaurant charge-offs make up the largest number of defaulted loans, according to the SBA. More than 150 loans made to Quizno's franchises — worth nearly $15.5 million — have been written off since 2007.

Restaurants have been part of the core market for Merchant Cash Advances since inception and will continue to be so. With default rates like those above, even the SBA will be very wary about guaranteeing loans to restaurateurs. Obviously for our agents selling MCAs you may want to continue targeting this client base.

For those restaurants seeking funding for expansion, improvements, etc. a merchant cash advance will continue to be a feasible alternative for financing. Yes, the rates are much higher than a traditional SBA loan, but given the added risk highlighted above hopefully it is a little more understandable.