Though many of the nation's 40 credit card banks cater to small companies, American Express Co.'s recently became the first to offer them loans backed by the Small Business Administration.
Five weeks ago, the credit card giant began issuing lines of credit backed by the SBA, and already dozens of businesses have signed up. American Express says it might expand its SBA offerings this year to include term loans, but for now it is concentrating on the lines of credit.
"The SBA has really streamlined the lending process and given us a tremendous opportunity to provide small loans to small businesses," Donna Vieira, the executive vice president of Amex's small-business group, said in an interview last week.
American Express Centurion Bank is offering lines of credit of up to $25,000 through SBAExpress, a component of the agency's flagship 7a loan program that is designed to increase the number of small loans of under $50,000 in value it guarantees.
The lines of credit carry an interest rate of 6.5% above the prime rate, and the SBA guarantees up to 50% of the amount of each line. Amex is hoping to use them attract small businesses that are just starting out or are looking to expand and would not qualify for its standard line of credit - up to $100,000 at 4.9% above prime.
SBAExpress was set up in 1998 with the goal of increasing the number of small 7a loans by simplifying the process and allowing lenders to use their own forms and policies to underwrite and process applications. There are nearly 5,000 SBA lenders, but only the most active ones - about 600 - qualify for SBAExpress.
Ms. Vieira said that Amex, which has been offering small-business lending for 15 years, decided to start working with the SBA now because it recently streamlined its SBAExpress program by cutting back on paperwork and adding incentives to make smaller loans. This improved a product that fit in well with the credit card company's other small business offerings, she said.
Adding SBA loans to its menu is one of the ways Amex is developing its OPEN small-business network, which it created in January 2002 to put all of its small-business products and services - including credit cards, loans, retail discounts, and advice - under one division to make them more attractive and accessible.
Ms. Vieira said that Amex is waiting to offer term loans until it has more experience with SBA lending.
"This is a new area for us, so we need to get the SBA process set up to test the waters before we get other products up and running," she said.
Still, the SBA is expecting Amex, the first new nationwide SBA lender in several years, to be successful and provide small businesses with another credit option.
James Hammersley, the agency's director of loan programs, said that the lines would make credit available to a large number of small businesses, particularly those that already have a relationship with the credit card company.
"American Express has a large small-business footprint, so it's a good thing for small-business customers to bring another large competitor into the market," he said.
