The Wall Street Journal
By: Matthias Rieker
June 29, 2010
J.P. Morgan Chase & Co. wants small businesses not just to borrow, but also to hire.
The U.S.'s second-biggest bank by assets said Tuesday it will lower the interest rate charged on a line of credit to small-business customers by half a percentage point for every new hire they make, for up to three hires.
"We encourage businesses to take advantage of the lowest interest rates in years and to create more jobs for the economy," Jamie Dimon, chairman and chief executive of J.P. Morgan Chase, said in a press release. Mr. Dimon is meeting with small-business owners later Tuesday at the bank's headquarters on Park Avenue in New York to launch the program.
The program applies to new lines of credit up to $250,000, or existing business customers who increase their lines of credit by $10,000 or more. The bank will hold seminars in 11 cities to "help local business owners increase sales and fund their businesses," the release said.
Small-business lending has been a hot-button issue during the economic downturn, with public pressure directed at banks, many of which received government assistance, to help reduce unemployment by making loans. Bankers have argued there's not enough demand from credit-worthy borrowers. Losses from small-business loans have been severe at Bank of America Corp. and other major small-business lenders.
Several banks have started lately to lend more to small businesses. J.P. Morgan said first quarter loans to small businesses rose 31% from a year earlier, to $2.1 billion. Small-business loans at Bank of America, the nation's largest bank, rose 18% from a year earlier, to $19.4 billion.
In February, Huntington Bancshares Inc. said it would double its annual small-business lending over the next three years, to $1.5 billion. CEO Stephen Steinour told Dow Jones Newswires at the time that loosening underwriting standards is the only way to provide credit to small companies that have been shut out from getting a bank loan.
Many banks, including J.P. Morgan, U.S. Bancorp, PNC Financial Services Group Inc., and Capital One Financial Corp. have been giving every rejected small-business loan a second look.
U.S. Bancorp, the nation's sixth largest bank by assets, said it started two years ago to train about 3,000 bank branch managers about small-business lending and to make such lending a priority.
Four years ago, "we really weren't paying enough attention as we should to the small loans," said Kent Stone, head of consumer support services at U.S. Bancorp; 30% of consumer banking customers at the Minneapolis bank are small-business owners. While such loans declined in 2007, the portfolio improved in late 2008 and is now growing at double digits, Mr. Stone said.
Capital One said it has applied to business credit cards many of the new regulations put in place for consumer credit cards, and recently introduced a new credit card that offers small-business owners double miles on all purchases, bonus miles and flexible redemption options. Still, a spokesman for Capital One said, small businesses "have less opportunity for growth and thus less need for the credit required to fund that growth."
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