After learning that 15% of its small business members were denied a loan to keep their operations running, Sam's Club launched a national pilot program that would make capital available to them.
Sam's Club, a division of Wal-Mart Stores Inc., has partnered with Superior Financial Group, a federally licensed nonbank lender that provides SBA loans mostly to businesses owned by women, minorities and veterans, the company said July 6. Loans from $5,000 to $25,000 will be available under the SBA's Community Express, Patriot Express and Export Express loan programs.
Sam's Club members will receive $100 off the $500 application, packaging and processing fee, a 20% discount and a 7.5% APR. The term of the loan is 10 years and there is no early repayment penalty. Business memberships cost $35 annually at Sam's Club. Members can apply online for the loans. This newest addition complements other business services including merchant credit card processing, order-ahead programs and early shopping hours.
The retail outlet rolled out a smaller version of the loan program in May in Memphis, Dallas, Tulsa, Okla., and Concord, Calif., according to Sam's Club spokesperson Kristy Reed. Since then, more than 40% of loans submitted have been approved. Reed did not provide a total dollar amount, saying the numbers were increasing rapidly.
"As we surveyed small businesses, we found that many of them were not able to finance their operations," Reed said. "When we're faced with a challenge like this, we like to meet it."
In a November 2009 survey conducted by Sam's Club, nearly 15% of its business members reported being denied a loan to run their operation, up from 12% in April 2009. Reed said among its several membership tiers, small businesses make up the largest segment of its Advantage group.
Catherine Corley, vice president of membership at Sam's Club, said: "Access to capital is a major pain point for our members and the small business Main Street community. We believe this pilot program is a step in the right direction to help fuel small business growth and create jobs to stimulate our economy."
Sam's Club looked at several vendors and decided to partner with SFG because its online application process was quick and innovative, Reed said. At this point, the Wal-Mart division is not planning to work with credit unions or any other lenders, she added.
Tim Jochner, CEO of SFG, said: "All lenders are trying to make an impact on Main Street, which includes minorities, women and veterans to help create jobs. Main Street however remains the most difficult underserved market to reach."
SFG was founded in 2005 to provide underserved businesses with access to capital using SBA Express products, according to its website. It is one of 13 small business lending corporations that are licensed and regulated by the SBA, the lender said. In addition to providing export loans, SFG is known for providing loans to businesses owned by women, minorities and veterans. It also offers free online technical assistance and online training courses.
This is not Wal-Mart's first entry into financial services. In 2007, the store partnered with ShareBuilder to offer an investment program to its customers and employees. In 2005, it also applied for an industrial loan company charter from the FDIC but withdrew its application in 2007 following complaints from credit unions, banks and legislators concerned that Bentonville, Ark.-based Wal-Mart could potentially have an unfair competitive advantage by running bank branches in its stores.