By Cindy Trillo
Small businesses in Elk Grove and the rest of California can breathe a sigh of relief following Gov. Jerry Brown’s signing of the nation’s first small business truth-in-lending law. Bill SB 1235 promises to provide small business owners with transparency when selecting financial products and protect them from complicated products. The new bill is a positive step in support for Elk Grove’s small businesses who, up until now, have faced interest rates as high as 350%.
Seeking clearer product information
For the past five decades, the Truth in Lending Act 1968 has been the only piece of legislation in place which requires lenders to be upfront regarding interest rates and repayment terms. However, the act protects consumers as a whole and small businesses have faced undesirable financial products. Mission Fund has revealed that that the average APR for small business loans is a staggering 94%. Therefore, it’s no surprise that 80% of California’s small business owners say that they are in favor of clearer product information from online lenders.
A positive move
SB 1235, which is due to come into effect in January 2019, strives to provide a common sense approach to small business lending. Ultimately, products will be clear, transparent and unambiguous. Following the signing of the bill, Levi King, the CEO of Nav stated that the legislation could have a significant impact. “Small business employs nearly half of all of (California’s) employees. But, according to the US Department of Labor, 100,000 California small businesses close each year. And the data shows a top reason these businesses fail is due to poor credit arrangements.”
Better protection for all
Not all lenders have failed to reveal the truth about their products. There are plenty of financial providers who service Elk Grove’s small businesses who understand the importance of offering competitive rates and honest disclosure. This has meant that small businesses such as DreamGirls Fine Hair Imports and Salon in Old Town, who earlier this year won the ‘Small Business of the Year’ award, have been able to flourish and boost the city’s economy. The lenders that have been honest have also protected themselves from settlement claims. While the settlement process is swift and offers businesses with positive results as in the case of Erik H. Gordon in 2016, it’s also beneficial for the city’s lenders and small businesses to have a mutual and workable agreement from the outset.