In the wake of the subprime mortgage collapse, and amidst the proposed consumer financial protection bill, it seems that small businesses are finding it tougher and tougher to get access to small business credit. This seems to be one of many unfortunate “side-effects” of both our current economic crisis, and the proposed regulations that small businesses and others may soon be facing. And many smaller lenders are already planning and preparing for these possible changes in federal regulation that may soon cast new restrictions on how they currently do business.
Many small businesses will not be able to cope with changes to their financing options or afford the legal council to draft changes to their contracts, leading many to simply abandon their current financing options. Unfortunately, these financing options many times are a driving force in their business providing simple finance options for working-class Americans who otherwise would not be able afford the purchase, and without the ability to provide financing options to their customers many businesses may not be able to survive losing sales due to lack of financing.
For example, dentists often offer “in-house” financing options, meaning that you could get braces for your children and apply for finance options right in the dentist’s waiting room. This new legislation stands to oversee this type of finance, in which case many dentists will simply abandon offering any finance options leaving no options for their patience but to take online payday loans for their dentist and other doctors bills. In spite of the fact that finance options help drive their business by offering credit options to those who cannot simply pay their total balance “up-front”, they simply are not in the business of finance therefore are not prepared to cope with new financial regulations.
While one could argue that payday and short term cash lenders could benefit from this arrangement, but the at their payday loan blog, folks argue that they are also falling within the small business category and the financial regulation is making it more costly for them to lend short term cash hence the cost of payday advance loans are also increasing.