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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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