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Banking, finance, and taxes

Small Business Loans Rise With Small Business Defaults

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By Douglas A. McIntyre Updated Published

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The business of lending money to small businesses has entered a vicious cycle. The Small Business Administration says that it processed 12,393 loans in the fourth quarter of last year. That is up 9,070 in the same period in 2008. The SBA receives federal support to increase its loan activity, but the increase in activity may send a false signal about the recovery rate of small businesses in the US.

While the SBA is making more loans, small business defaults are rising quickly. Reuters reports that a recent research report from PayNet shows that November marked the 22nd consecutive month of loan accounts that are over 180 days past due. Most of the money from these obligations will never be collected. Loans that are in this “uncollectable” category are now almost 1% of all small business loans.

The SBA may find that the only way that banks will increase their exposure to small business credit will be if the SBA is willing to back the loans. This may stimulate small business activity, but it will add to the federal government’s deficit. It is a small part of loading the federal camel until its back is broken.

Douglas A. McIntyre

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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