As it becomes increasingly difficult for small business owners to receive a loan from reputable institutions, you are forced to turn to predatory lenders to receive the help you need to fund your small business. Take the case of Los Angeles restaurateur Jorge Rodriguez Assereto, for instance.
You could do what he did when he needed to make expansions and renovate his restaurant, which is sift through the pile of junk mail you receive each day until you find a solicitation from one of the many companies that offers high risk loans to those who are desperately in need and cannot find another method for procuring the necessary capital.
These loans are essentially the last line of defense before a small business owner is forced to declare bankruptcy or scuttle their plans for expansion or renovation. However, spending several thousands of dollars each month to repay these loan sharks is probably not a palatable solution to you.
Banks are no longer as willing to give out loans to small-business owners, which forces them into a shadowy underworld, filled with predatory lenders who mostly exist online and are essentially without any form of government regulation. As such, these companies can charge you whatever rate they are most comfortable with.
Selling debt to a number of consumers who are not going to be able to afford it has become all too common. The housing market recently experienced a nearly catastrophic crash, due to the fact that banks were handing out adjustable rate mortgages to anyone and everyone. You might be just like everyone else, believing that you can stomach these high rates for a few months before finally being able to turn the corner financially.
This never happens, however, leaving you to dig yourself out of a pile of debt that may never subside. There is no end in sight to these predatory loans, leaving small-business owners with no other place to turn. While some of these lenders may mean well and have the best of intentions for the business owners they lend to, others sidestep legal loans definitions by presenting their service as a payday loan.
Cities are making a more concerted effort to snuff out these predatory loaners, but financial observers believe that this is merely the beginning. Since these predatory loans only seem to affect minorities, there is a certain lack of awareness that comes with this growing epidemic.
This problem is likely to get much worse before it improves. As more and more minorities are adversely affected by these predatory loans, the onus shifts onto the national and state governments to close the loopholes that allow lenders to gouge their consumers. There is no stopping this issue, but enhanced regulation is looming around the bend.