We’ve heard how difficult it is for small businesses to secure bank loans, a new Fed report says that banks have been very willing to issue small business credit cards.

About 75 percent of applicants in 2009 were approved for small business credit cards, according to the report . Even among businesses considered high-risk, 72 percent were approved for a credit card.

In general, credit card loan terms are worse than regular loan terms. The average interest rate on a business credit card in 2009 was about 12 percent and cash advance interest rates 20 percent or more, says the report.

Credit card issuers can also change the terms of the loan or revoke credit card lines altogether. Business credit cards are not subject to the consumer protection afforded by the credit card reform bill passed last year.

While over 80 percent of small businesses use credit cards, only 12 percent borrow (carry over a balance from month to month) on credit cards.

If small business owners worry about borrowing on credit cards, they won’t invest in long-term businesses planning or growth, says CNN.com . And that means they won’t invest in hiring, the linchpin in reviving the economy.

Credit unions are lobbying Washington to lift the cap on lending rules that have been in effect for 12 years. Currently, credit-union lending is limited to 12.25% of a credit union’s total assets. The Credit Union National Association is pushing to raise that limit to 25% of total assets.

The vast majority of credit-union loans go to small businesses. CUNA estimates that a change in the law would enable them to extend up to $10 billion in additional business loans.

Banking lobby groups oppose the legislation, saying that an increased cap would create a distorted competitive environment detrimental to community banks, also big lenders to small businesses, according to an article in the Wall Street Journal.

Credit unions were created to provide financial services to people of modest means, and members pay a small fee to join. They are member-based organizations with non-profit tax status – another bone of contention for the banking lobby. Credit-union lending to small businesses increased in 2009, while lending by community banks decreased, according to the WSJ.com article.

Banks contend that there is not enough oversight on credit-union loans, so customers are more likely to default on their loans.

Small business owners who were approved for credit-union loans after being turned down by banks said they faced a rigorous application process at the credit unions.

Matthew Rembe, owner of Los Poblanos Inn and Cultural Center in Albequerque, received a $3 million loan from a credit union to expand his business after a year of getting turned down at banks.

“There was major due diligence,” Rembe told the WSJ.com. “In the past we’d gotten easy money, so it was not what we were used to at that point.”

For most people, retirement means deferring their income in order to save for future retirement expenses. But what can one expect from those years and years of saving? A Monte Carlo simulation calculator Monte Carlo calculator can be a great retirement planning resource for people who want to manage their expectations.

Using the Monte Carlo calculator, one can run a number of potential scenarios for retirement. What will happen to your nest egg if you have unexpected long term medical expenses or there is a sudden crash in the stock market, or an increase in tax rates. Rather than worrying about it, you can plug in the numbers into a calculator, and see how it would effect your retirement fund and adjust accordingly. The difficult part, of course, is to make interpretations of the probable output that a retirement fund may accrue and to know the reliability of these results.

The Monte Carlo calculator analyzes and predicts the potential yield to your retirement portfolio, from the history of your investment phase. Rather than assuming a static rate over a period of 30 years, this retirement planning tool accounts for variations over the long period and the potential effect of those variations over the long haul. However, this tool has been controversial having a range of different outputs depending on the assumptions entered into the tool. Therefore, the real question is, how does one use the Monte Carlo simulation tool in an effective way? The key is using it to track ballpark progress rather than using it as a predictive measure.

The most sound advice we could offer about the Monte Carlo simulation tool is that it is a useful tool to see how potential scenarios would effect your potential retirement fund. But as you are building up your nest egg, we would not recommend “putting all your eggs in one basket” by relying only on the results of the Monte Carlo simulation.

Under the new credit card reforms, consumers are no longer subject to “over-limit” fees, but the same protection does not apply to small businesses. Credit card companies would typically ding customers with a $35 fee if they spent over their credit limit.

Business Week talked to Kevin Reeth, the CEO of a 10-employee online bookkeeping service for small businesses, who recently got an American Express SimplyCash business credit card with just a $3,000 credit limit, despite having $2 million in the bank. Reeth told Business Week he’s been charged over-limit fees two times since Oct. 1, 2009, when AmEx eliminated those penalties on consumer cards.

But the rules can be confusing. A statement on the AmEx web site says: “Although it’s not required by the new credit card laws, American Express eliminated all over-limit fees effective October 1, 2009.”

Reeth also said the company was inconsistent in charging the fee and sometimes his card was declined. The AmEx spokeswoman told Business Week in an email that decisions about transactions and fees are made on a “case-by-case basis.” She added that customers can sign up for an email alert to keep track of their balances.

Reeth maintains that the over-limit fee is a way for the company to charge a high-interest rate on short-term loans. American Express — one of the top providers of small business credit cards – said over-limit fees for small businesses aren’t going anywhere.

A new requirement by the Obama administration will hopefully spur the 21 largest banks receiving U.S. government money to lend more to small businesses.

The new rules, outlined in a March 16 Associated Press story, have those banks reporting monthly on how much they lend to small businesses. All others are being called upon to make an “extra effort” to boost small business lending.

The announcements came March 16 as part of a broad package aimed at small business that was being unveiled by President Barack Obama and Treasury Secretary Timothy Geithner, the AP said. The package also includes reduced small business lending fees and an increase on the guarantee to some Small Business Administration loans.

“We know that small businesses are the engine of growth in the economy, and we absolutely want to do things to help them,” Christina Romer, who heads the White House Council of Economic Advisers, told the wire service. “There are already a lot of things to help them in the recovery package, and some of what will be coming out are the things that were in the recovery package: increasing the SBA loan guarantees, lowering fees.”

Republicans appeared to embrace the efforts, but with some qualifications.

U.S. Rep. Eric Cantor of Georgia said: “We’ve got to do something to help these small-business people. We know that they’re the job creators in this economy. And the problem … I think we’re seeing out of the Obama administration is a lack of focus on how to get things going again.”

The new measures have the government stepping in to buy loans, temporarily eliminate upfront fees of up to 3.75 percent and some processing charges on certain SBA loans typically passed along to borrowers, the AP said. It also increases the government guarantees on certain loans to 90 percent, up from 85 percent for loans below $150,000 and 75 percent for larger loans.

The head of the U.S. Small Business Administration said the latest version of a government plan to pry loose lending markets will help small businesses.

Acting SBA Administrator Darryl K. Hairston in a Feb. 10 release praised the Federal Reserve Bank of New York and the latest version of its Term Asset-Backed Securities Loan Facility, or TALF.

“If we want to thaw the credit markets for small businesses, we absolutely have to get the secondary market for small business loans moving again. TALF is a critical element in doing that,” he said. “SBA supports this program and we’re glad the TALF is moving forward with some changes we asked for that will make SBA lending more attractive for 7(a) and 504 program lenders.”

The goal of TALF is to help unfreeze recession-battered credit markets and its revised terms and conditions were announced on March 3 by the Federal Reserve of New York.

The revisions include a reduction in the interest rates and collateral haircuts — a percentage subtracted from the market value of the collateral — for loans secured by asset-backed securities guaranteed by the Small Business Administration or backed by government-guaranteed student loans.

The Reserve said in a release that TALF was “designed to catalyze the securitization markets by providing financing to investors to support their purchases of certain AAA-rated asset-backed securities. These markets have historically been a critical component of lending in our financial system, but they have been virtually shuttered since the worsening of the financial crisis in October. By reopening these markets, the TALF will assist lenders in meeting the borrowing needs of consumers and small businesses, helping to stimulate the broader economy.”

Under the announcement, the Federal Reserve Bank of New York will lend up to $200 billion to eligible owners of certain AAA-rated ABS backed by newly and recently originated auto loans, credit card loans, student loans, and SBA-guaranteed small business loans.

Issuers and investors in the private sector are expected to begin arranging and marketing new securitizations of recently generated loans, and subscriptions for funding in March will be accepted on March 17, the Reserve said.

On March 25, those new securitizations will be funded by the program, creating new lending capacity for additional future loans, it said.

The program will hold monthly fundings through December 2009 or longer if the Federal Reserve Board chooses to extend the facility.

“SBA is optimistic the TALF will help unfreeze the secondary markets and help restore liquidity to the small business lending industry,” Hairston said. “We’re going to keep working closely with the Federal Reserve and the Treasury to make this program successful.”

The head of the U.S. Treasury is making good on a promise to take billions worth of toxic assets off the books of U.S. banks.

In a Feb. 10 Reuters story carried by Businessworld , Treasury Secretary Timothy Geithner was set to lay out a rescue plan based on a mix of public and private funds to wipe clean $500 billion of such troubled assets.

While details were light, Reuters reported that sources said the plan would also extend a Federal Reserve program allowing the U.S. central bank to extend up to $1 trillion in loans.

But what was clear in the days following the announcement was that the U.S. had learned from the shocking failure of investment bank Lehman Brothers, which went under in September, marking the largest bankruptcy in U.S. history, and would not let other banks fail.

The plan also included a huge boost in the government’s stakes in one key bank, Citibank, bringing it up to a possible 36 percent, reports said.

Geither’s plan follows a Feb. 9 press conference where President Barack Obama told reporters that cleaning up banks’ balance sheets was a priority and didn’t rule out the possibility that it will take more money than the $700 billion Congress already has approved to complete the job, Reuters said.

“We don’t know yet whether we’re going to need additional money or how much additional money we’ll need until we see how successful we are at restoring a level of confidence in the marketplace,” Obama said.

Obama then called on Congress to speedily approve both Geithner’s plan and an economic stimulus package to complement the revamped bank-rescue proposals, Reuters said.

“If you delay acting on an economy of this severity, then you potentially create a negative spiral that becomes much more difficult for us to get out of,” Obama said. “This is not your ordinary, run-of-the-mill recession, we are going through the worst economic crisis since the Great Depression.”

Geithner, the former president of the New York Federal Reserve Bank, said banks will be closely monitored and tested.

“The spectacle of huge amounts of taxpayer money being provided to the same institutions that helped cause the crisis, with limited transparency and oversight, added to public distrust,” Geithner said in remarks prepared for delivery after the release of the new measures, Reuters said.

Credit ratings agency Standard & Poor’s expects nonperforming loans to continue to rise through 2009 and into 2010, forcing banks to increase reserves to cover losses.

The number of bank failures is also expected to increase amid the widening economic downturn, Standard & Poor’s said in a new report released Jan. 6.

“Asset-quality weakness will likely spread to a wider range of loan types such as commercial real estate, credit cards, and certain pockets of commercial lending, such as loans to the auto and retailing industries,” S&P said according to The Associated Press via BusinessWeek.com.

Such news came as no surprise as analysts widely predicted the recession would cause losses to continue to mount and move beyond residential real estate.

The key will be to use government support to keep capital levels as high as possible, S&P said, though warning that such support cannot completely protect the industry.

The most notable government program at work is the $700 billion TARP program, which stands for Troubled Assets Relief Program. The investment program allows the Treasury Department to directly purchase preferred stock in banks. Other programs include expanding government lending options to various banks, the AP said.

This article was submitted by Kathleen O’Connor, a contributing writer for Biz2Credit. Biz2Credit is a small business marketplace that provides entrepreneurs with the latest industry news and financial advice. Send all questions to info@biz2credit.com.