The History of Business Loans
By
John Williams
The
first business loans possibly date back to ancient Greece. One of the
most important services offered by Greek bankers was the lending of
money to finance the carriage of freight by ships. They also lent money
for mining, and construction of public buildings. Later, during the
middle ages, the Jews fled for their lives to Italy, where they
encountered grain farmers looking for money to help support their
businesses. The Christians, who were the current settlers of Italy,
were forbidden the sin of usury, or charging a fee for the use of
money. Today, the word usury is used to describe placing unreasonable
interest rates on borrowed money. Therefore, this opened the door for
the newcomers, the Jews (who were merchants), to lend money to farmers.
The term “merchant bank” derives from this origin and was one of the
first banks that offered “business” loans to the grain farmer.
Merchants remained the main source of funding for trade and business
loans well into the 1700’s.
In 1781, the first commercial bank received a charter of
incorporation in North America. They gave short-term credits to
American merchants, who then extended them to wholesalers of their
imports, and the wholesalers passed them on to urban retailers, country
stores, and peddlers. By 1789, the nation boasted three commercial
banks.
One of the most famous men noted for loaning the “little man” money
for business is A.P. Giannini. Historians have referred to him as
“America’s banker”. Up until this time, most banks would only loan
money to those that were wealthy. In 1904, Giannini opened up the Bank
of Italy in San Francisco. Hard working immigrants looking to open
businesses and buy homes were given the opportunity to finally borrow
money. After the earthquake that destroyed much of the city in 1906,
Giannini once again came through; giving loans to people to rebuild
their lost businesses. By the mid 1920’s, he owned the third largest
bank in the nation. In 1930, he formed the Bank of America, which
withstood the Great Depression, funding large industrial and
agricultural interests, as well as building California’s movie industry
and even loaning the money to the city for the building of the Golden
Gate Bridge.
One of the most important types of business loans available to
Americans are backed or guaranteed by the American government. These
loans are available to small businesses and ordinary people that may
not qualify for other business loans. The Investment Company Act of
1958 established the Small Business Investment Company Program. This
program enables the government to regulate and provide funds for
privately owned and operated venture capital investment firms. These
firms then in turn provide loans to high-risk small businesses. Since
1958, the government by means of the Small Business Administration has
put nearly $30 billion dollars into the hands of business owners to
finance their growth. Currently, the SBA is working with minorities and
women regarding their business ventures (www.sba.gov).
Throughout history, merchants, bankers and government agencies have
been keeping the entrepreneur’s dreams alive by allowing them to borrow
capital based upon an idea, service, or product. These dreams are still
alive and well today, and are being realized every day thanks to
governments and bankers alike.
About the author:
Check out the business loans blogger at http://businessloans.blogspot.comHe reviews business loans and interprets complicated financial data into simple to understand language.
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