The History of Business Loans
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.