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Know your rights as a small business borrower

The way small businesses borrow money is being completely transformed by the rise in online lending. Innovators are providing faster and easier ways to borrow and increasing access to credit in communities that have historically been underserved. But this transformation will only achieve its potential if it is built on transparency, fairness, and putting the rights of borrowers at the center of the lending process. 

That’s why we helped develop the Small Business Borrowers’ Bill of Rights. Although the law does not yet protect most of these rights, business owners should be mindful of them in order to avoid becoming a victim of predatory lending.

The Borrowers’ Bill of Rights outlines the following six key principles.

  1. You have a right to see the cost and terms of any financing you are offered in writing and in a form that is clear, complete and easy to compare with other options, so that you can make the best decision for your business.
  2. You have a right to loan products that will not trap you in expensive cycles of re-borrowing. Lenders’ profitability should come from your success, not from your failure to repay the loan according to its original terms.
  3. You have a right to work with lenders who will set you up for success, not failure.
  4. You have a right to transparency, honesty and impartiality in all of your interactions with brokers.
  5. You have a right to fair and equal treatment when seeking a loan, and can’t be discriminated against.
  6. If you are unable to repay a loan, you have a right to be treated fairly and respectfully throughout the collections process.

As you navigate your loan options, our Borrowers’ Bill of Rights checklist will empower you with information on good and fair lending practices.

  1. Make sure you ask the lender about interest rates, fees, monthly charges and any prepayment penalties upfront. Make sure they are clearly disclosed.
  2. Make sure the payment amount and frequency are easily identified.
  3. If you’re refinancing, ensure there are no fees or fixed charges being added to the existing principal.
  4. Make sure the lender is not imposing any artificial deadlines for accepting the loan offer.
  5. Finally, if going through a broker, make sure their fees, including those paid up front and over the life of the loan, are clearly disclosed.

For more information on the Small Business Borrowers’ Bill of Rights, visit our Access to Capital Portal or www.responsiblebusinesslending.org.

This work is supported by the Sam's Club Giving Program.

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