Small Businesses and Predatory Lending Are a Recipe for Unpayable Debt
Operating a small business requires you to shift your expectations constantly. Entrepreneurship is not for you unless you can live with uncertainty. Small businesses frequently take out business loans in much larger amounts than most individuals would feel comfortable taking out a personal loan. Business owners base their decisions about how much to borrow and which terms and conditions to accept on the best-case scenario, so they often have to think quickly to deal with unexpected financial setbacks. Sometimes this means having to renegotiate the terms of the loan, borrow more money, file for bankruptcy, close the business, or some combination thereof. Unfortunately, predatory lenders are eager to capitalize on entrepreneurs’ willingness to borrow now and ask questions later. If you are struggling with business debt, contact a Jupiter debt lawyer.
Small Businesses Are Easy Prey for Predatory Lending
There has been much media coverage about predatory lending products that target low-income consumers. If your paycheck comes straight to a debit card because you don’t have a bank account, your email inbox is probably flooded with advertisements for payday loans and buy now pay later (BNPL) offers.
Small businesses are another favorite target of predatory lenders. Most people are willing to take on more financial risk in a business context than they are with their personal finances. As a result, business loans often come with high interest rates and lots of fees that are difficult to avoid. The unfairness of predatory lending to small businesses does not get much press because people do not think about the individuals who suffer financial losses because of predatory loans to businesses. Debt obligations make it harder for businesses to take on new employees or even keep their current employees on the payroll. Furthermore, recently failed business ventures are a common reason that individuals file for bankruptcy protection.
The Small Business Financing Disclosure Act
Federal lawmakers are considering a bill that aims to protect small business owners from predatory loans. The Small Business Financing Disclosure Act was introduced in June 2023 and is currently under consideration. The bicameral bill’s authors are Senator Robert Menendez of New Jersey and Congresswoman Nydia Velazquez of New York. The bill would set new restrictions on the loan terms that lenders offer to small businesses. It would not even increase the requirements about the disclosures of loan terms that lenders must provide before people agree to borrow money for a business; it maintains the requirements listed in the provisions of the Truth in Lending Act. Rather, it would give the Consumer Financial Protection Bureau (CFPB) more authority to intervene in cases of predatory lending to small businesses.
Work With a Debt Lawyer About Coping With Business Debt
Only you can decide when it is time to walk away from a business venture. A South Florida debt lawyer can help you make wise decisions about small business debt, including renegotiating the terms of current loans or closing your business and filing for bankruptcy. Contact Nowack & Olson, PLLC in Jupiter, Florida to discuss your case.