Packaged Goods
Bundling hundreds of small-business loans into a single fixed-income security dilutes the risk that one of the borrowers will default. Lower risk means lower interest rates — and perhaps other benefits for small businesses. Among them:
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- Longer terms. Lenders that securitize loans are more likely to offer 10- to 25-year loans instead of the customary seven years.
- Fixed instead of floating rates.
- Faster turnaround time than an SBA-backed loan.
- Lending criteria that emphasize cash flow and experience of business owners as well as collateral.
- No personal guarantee required. The lender won't grab your house, car, or retirement fund if your business defaults.
- Loans larger than the SBA limits of $750,000 for ordinary business loans and $1.7 million to $2 million for land, buildings, and equipment.
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| DATA: BW. TERMS VARY BY LENDER. |
This article was originally published in the September 13, 1999 print edition of Business Week's frontier. To subscribe, please see our subscription policy.
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