Power Capital Consulting
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Sm. Bus. LOC Marketplace
Brief Marketplace Overview

2Q, 2008

The Small Business Line Of Credit (LOC) marketplace has become increasingly competitive, with an array of companies vying for market share.  While various products are available online, direct mail/telemarketed LOC products offer features tailored to various Small Business marketplace segments.  American Express, for example, links unsecured LOCs to alternative charge card products, while other competitors offer similar programs in various settings.  Direct Channel marketing methodologies include statement stuffers, direct mail, outcalling, incalling promotional programs, and third party programs.  Interaccount funds transfer, bill paying services, savings plans and other features are available, varying with the competitor and the program. 

Compass Bank offers up to $250,000 as part of their unsecured small business LOC, while other competitors such as Wachovia feature 24 – 72 hour decision turnaround time, and ease-of-use approaches including a one-page application with limitations on additional information requirements for most applicants.

Wells Fargo’s BusinessLine offers Small Businesses up to $100,000 lines ranging from Prime + 1.75% to Prime + 9.75%, and includes checks, telephone and online transfers, bill paying through a separate checking account, and $150 annual and opening fees.  Additional features include multiple personalized MasterCards for the business, automatic bill payment, overdraft protection, credit protection, and online statement access. 

Capital One offers a similar regional product in Texas and Louisiana, with no financials required up to $50,000, account access by phone, checking account, ATM, TowerNET online commercial banking, as well as an introductory rate of 3.99% for the first six months. 

American Express OPEN features an unsecured LOC product at rates varying between 7.99% - 12.99%, subject to change each billing period and penalty default rates, an area of current controversy within the industry.  Annual fees of $99 - $149 apply, with OPEN offering online applications for Business Gold Rewards Card, Blue for Business Card at a 0% introductory rate on purchases for up to 15 months, and a Starwood (Hotels) Preferred Guest Card. 

Although significant similarities exist, alternative direct marketing products feature distinct characteristics focused upon the small business segment to which they are targeted.
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