PayNet, an organization that offers risk management tools to investors and lenders by collecting and interpreting real-time loan information, recently reported their findings that those who are considering the investment on junk bonds should think hard before they do and should instead direct their attention on small business loans. A study showed that in the high yielding security industry, SBA loans are less dangerous compared to junk bonds.
PayNet further says that the small business loans are still expected to generate greater income in the coming years. President and Founder of PayNet, William Phelan, said in an interview that the default rates on SBA loans since 2006 reveals just an average rate of 6.9% in comparison with speculative grade bonds which has a substantial average rate by 12.9%.
The new figures should stimulate small business investments as well as boost the confidence of small business investors in the States. In the same way, this information should improve the readiness of banks to loan to qualified small business loan candidates.
The mentioned small business loan defaults are still expected to reduce to 4.6% this fiscal year and further drop to 3.9% in the next year. These numbers were based on an analysis done by Stanford University School Professor Darell Duffie.
Small business loans less risky than junk bonds: PayNet
