PayNet, an organization which provides risk management tools to investors and commercial lenders by collecting and interpreting real-time loan information, just reported their discoveries that those people who are considering the investment on junk bonds should think twice before they do and should rather steer their interest on small business loans. A study showed that in the high yielding security industry, SBA loans are less precarious than junk bonds.
PayNet further adds that the small business loans are still expected to generate better income in the coming years. William Phelan, President and Founder of PayNet, mentioned in an interview that the default rates on SBA loans since 2006 discloses just an average rate of 6.9% when compared with speculative grade bonds which has a substantial average rate by 12.9%.
The new figures should encourage small business investments as well as increase the confidence of small business investors in the US. In the same manner, this information should improve the readiness of banks to lend to eligible small business loan applicants.
The mentioned small business loan defaults are still estimated to decrease to 4.6% this fiscal year and further fall to 3.9% in the next year. These figures were according to an analysis done by Stanford University School Professor Darell Duffie.
Small business loans less risky than junk bonds: PayNet
