JP Morgan offers small businesses rate cuts if they hire

Discussion in 'Wall St. News' started by ASusilovic, Jun 30, 2010.

  1. JP Morgan 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. Dimon met with small-business owners later Tuesday at the bank's headquarters on Park Avenue in New York to launch the program.

    Kevin Watters, head of business banking, promised a group of small-business owners assembled that the bank would require "no hoops to jump through" to get the rate reduction.

    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.

    Watters and Charles Scharf, head of retail banking at J.P. Morgan Chase, told reporters that the sentiment among small-business owners has improved and small businesses are ready to expand and hire, in part because consumer spending isn't contracting any more and many business owners are optimistic that the economic recovery will hold.

    Dimon said recent meetings with small-business owners revealed that about half are planning to hire within the next 12 months--while a year ago most were planning layoffs. Still, large and middle-market companies are in good financial shape but are not yet seeing their businesses improving, Dimon said.

    "People are scared" despite the improving economy. "People are waiting, everybody is very careful. That's the flip side of everybody being too aggressive," he said.

    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 (USB), PNC Financial Services Group 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 small-business 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, 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."

    Not a bad idea... :cool:
  2. Fire three employees, re-hire the same three employees and then get the incentive! :D
  3. I don't really think banks are all that much in a hurry to actually loan money to small businesses. Many of them had their credit lines slashed or cancelled due to the financial crisis. But this makes for good press...
  4. Raise your rates a point and a half, then offer promotions to reduce it to where it was before!
  5. They don't get it. Companies aren't just going to hire people to put them on the payroll. There has to be DEMAND for products and services that causes a business to need more people. Cutting rates by a half percentage point doesn't bring back demand.
  6. Aha, the old census trick.
  7. S2007S


    So let's go borrow hundreds of thousands of dollars at 1.5% less by hiring 3 new employees we didn't need to begin with just to get that "special offer". Again this foolish thinking, this will not create jobs or even come close to turning unemployment around, I think the idea is totally worthless. Next idea to jumpstart the economy.......
  8. Daal


    Dimon must expect to be testifying before Congress soon
  9. Correctamundo. If a company's business starts picking up, they will either/both (1) pay overtime, or (2) put temps on the payroll. The business won't do fresh, new hires until their activity increases enough to make doing so more cost effective than both overtime and temps. Demand needs to increase a significant amount before that.
  10. MattF


    last year: suspend lines even with perfect payments
    this year: offer incentives to the leftovers

    #10     Jun 30, 2010