Loans & Social Media: Efforts to Get Small Business Owners To Spend
By Elana Centor on July 31, 2010
BlogHer Original Post
If there is one thing retailers want, it's this: seeing small business owners start spending money again. However, consumer confidence is low. Just last week, the consumer confidence index level dropped to its lowest point in three months. So what's a retailer to do?
They can either help their customers get more money via loans, or they can create promotions that save them a ton of money. That is exactly why the major retailers are up to. It's being coined as creating their own stimulus package for small business owners and consumers.
Sam's Club, a membership-only discount warehouse club, is now offering business loans to their small business members. Over half of Sam's Club's members are small businesses including convenience stores, restaurants, offices, daycares and schools,and motels. The lack of small business spending is impacting Sam's Club's bottom line.
Sales at Sam's Club stores fell 0.4% in 2010 due to a 1.4% decline in comparable store sales.
To help its own bottom line this year, Sam's Club laid off 1,500 employees and shuttered under-performing stores. Still, the key to its recovery is getting its small business customers to spend more money in Sam's Club. In May, Sam's Club started testing a program where members could apply for a business loan. The idea: an infusion of cash could encourage business owners to purchase office supplies and equipment that they might be postponing.
Sam's Club spokesperson Kristy Reed says, "We found that for the size of businesses our members own, offering $5,000 to $25,000 loans would have the biggest impact." Reed says with more traditional institutions, it's difficult to get these smaller size loans.
Still, why would someone go to Sam's Club for a small business loan? Reed says, "We don't charge an application fee. If a small business owner is not approved for the loan, they don't have to pay anything." Reed also says the overall fees for processing the loan are about 20% less than typical costs, and Sam's Club was also able to negotiate a lower interest rate -- the Sam's Club rate is 7.5 APR, which is a 25 basis point discount.
The Sam’s Club small business loan pilot will focus on serving Main Street minority, women and Veteran owned small business owners as well as micro-entrepreneurs under the SBA’s Premier Outreach Express products such as Community Express, Patriot Express and Export Express loans.
Sam's Club is partnering with Superior Financial Group, the largest Small Business Administration (SBA) lender in the country.
While the program is too new to show trends, early data indicates that Sam's Club is approving slightly less than the national average for small business loans. Reed says about 44% of their members are being approved for the small business loan. "Only half of small businesses that tried to borrow money last year got all or most of what they needed, according to a survey by the National Federation of Independent Businesses," said Reed.
About 75 percent of applicants in 2009 were approved for small business credit cards, according to the report . Even among businesses considered high-risk, 72 percent were approved for a credit card.
In general, credit card loan terms are worse than regular loan terms. The average interest rate on a business credit card in 2009 was about 12 percent and cash advance interest rates 20 percent or more, says the report.
Other retailers are trying to get small business owners to spend money by offering cash-back type promotions Target, Kmart, Sears and Toys R Us are all offering major discounts to their customers.
Office Depot is perhaps the most aggressive of the office supply retailers. Spokesman Jason Shockley told Walletpop via email that the store is giving bonus rewards to members of its loyalty program, recently offering 100% back in rewards on everyday supplies including water, pads of paper, plastic storage, pens, batteries and binders, and 50% back in rewards on all case paper and copies from the copy and print depot.
Denise Vitola of Ogilvy PR blogs that because of the low consumer confidence index, retailers should be looking to social media to convince small businesses and consumers to spend their limited dollars in their establishments.
According to DMNews http://www.dmnews.com/jcpenney-boosts-mobile-efforts-for-2010-back-to-school-campaign/article/174651/, JCPenney is turning to social and mobile components like texting; they will also be partnering with six teen girls to create back-to-school haul videos http://www.youtube.com/watch?v=ULtpWix10ro. In order to stay current with consumer trends, retailers must jump on the social media and mobile commerce train. Unfortunately, without it they will feel the implications of a weak economy even more.
Will you apply for one of Sam's Club's SBA-backed loans? Are you paying attention to the various retail promotions that offer cash back on your purchases? Finally, do you think any of these activities can make a dent in curing the economy?
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