B2B Payments

Are Small Businesses The New Subprime Market?

Small businesses with limited credit history or a history of difficulties face many of the same issues that individual consumes with those problems face—mainstream lenders often aren’t willing to take the risk and disburse funds. Increasingly, small businesses also have access to the same type of “alternative financing,” that consumers do. Through companies like World Business Lenders entrepreneurs that need loans but can’t find financing elsewhere can get an infusion of cash…as long as they are willing to accept an interest rates that can climb as high as 125%, reports BusinessWeek.

What they don’t have is the same protection as individuals, and thus they are prime targets for predatory lending practices that can ultimately destroy a business. Owners who find they can’t keep up with the payments will find themselves forced into bankruptcy by companies like World Business Lenders, who will likely cease all of their corporate assets in the process

"This is the new predatory lending,” Mark Pinsky, president of Opportunity Finance Network, a group of lenders that help the poor, told BusinessWeek. “And the predators, just as they did in the mortgage market, have gotten increasingly aggressive."

The industry takes in a reported $3 billion per year, twice the volume of small loans guaranteed annually by the Small Business Administration.

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