Loans of up to $25,000 will be available to small-business members of Wal-Mart’s Sam’s Club warehouse stores under a partnership with the lender Superior Financial Group.
Wal-Mart, in announcing the program, said it is aimed at entrepreneurs and business owners who are minorities, women, and veterans. According to a survey conducted by Sam’s Club, a division of Wal-Mart Stores Inc., approximately 15 percent of Sam’s Club small-business members said they were denied a loan in November. That figure was 12 percent in April. In addition, only half of small businesses in the U.S. that tried to get loans last year got all or most of what they needed, the retailer said.
"Access to capital is a major pain point for our members," Catherine Corley, vice president of membership at Sam's Club, told the Associated Press. "We believe this pilot program is a step in the right direction to help fuel small-business growth."
Small-business members of Sam’s Club, who pay a $35 annual fee, can apply for loans of $5,000 to $25,000 at an annual interest rate of 7.5 percent over 10 years. In the pilot program with Superior Financial Group, which is a federally licensed nonbank lender, applicants will get $100 off the application fee and other discounts. Applications can be filled out online. Sam’s Club will get $50 per funded loan.
According to The New York Times, approximately 200 people have applied in the small test thus far, with roughly 45 percent being approved, said Tim Jochner, chief executive and founder of Superior Financial. Sam’s Club may offer other financial products through third parties, such as working-capital loans or peer-to-peer loans, Hiren Patel, director for financial services at Sam’s Club, told the newspaper.
"It seems like a traditional program done in a unique way," said Carl Tobias, Williams Professor at the University of Richmond School of Law. "It benefits Sam's by potentially adding members and can aid existing members,” he told The Wall Street Journal. Still, "you have to question if customers will turn to Sam's Club if something goes awry" in the customers' relationships with the lender, Tobias said.
In a Bnet.com blog, business reporter Carol Tice wrote that while Superior is the top lender of Small Business Administration-backed small-business loans, because of the bank-lending slump, one downside for Sam’s Club is that nonbank lenders don’t have a good reputation.
“Basically, lenders such as Superior are lumped in the minds of many into the same category as payday lenders, currency exchanges, and issuers of money orders,” Tice wrote.
The loan program comes as Wal-Mart tries to boost sales at Sam’s Clubs. Ten stores were closed in January.