Mon 2 Nov 2009
Do you think your small business is protected against predatory lending and unscrupulous financial practices? Think again. Many small businesses are being caught in an unfair Catch-22, and the government is not taking action to protect you. If your small business has debt, then the laws that protect consumers from predatory practices may not apply to your company.
Is it a Personal or Business Loan?
It is important to first understand that most lenders see small businesses merely through the individuals who own them. In other words, your ability to obtain a loan as a small business will likely be directly related to your personal credit.
Most lenders expect small business owners to secure their own debt, and rates and terms of small business loans are directly influenced by the business owner's personal credit and financial situation.
Where is the Protection for Small Businesses?
One would assume that small businesses would be granted the same protection as consumers when it comes to predatory financial practices. Unfortunately, however, this just isn't the case. In fact, the Truth in Lending Act and the Fair Debt Collection Practices Act, both of which are designed to protect consumers from predatory lenders, do not cover business to business transactions!
A fine example of this is the new credit card legislation, which is set to go into effect in February 2010. Although the law is designed to protect consumers from unfair credit card practices, small business cards are not included.
Therefore, small businesses are left out of important legislation that could protect them from questionable credit card practices. One would think that a small business owner would be afforded the same protection as a consumer, but this just isn't the case.
The line between consumers and small businesses have become so blurred that small business owners have been essentially caught in the middle and left without adequate protection, merely because no one can decide whether to treat them as a business or as an individual.
While we hope that the legislation will change to protect small businesses with the minimum rights that consumers enjoy, in the interim, it is important to consistently stay ahead of the fine print in your loans and credit card debt.