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Love and Debt: Why you need to talk about money

How to Stop Living Paycheck to Paycheck

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What You Should Know About Debt Settlement

Create a plan to deal with medical debt

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Will Changes in Credit Reporting Affect You?

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Homeownership is possible

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Is There a Service That Helps You Not Pay Bills

Is a Debt Owed

Patience is the key to furnishing a new home

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Finding Money to Reduce Your Debt and Improve Your Credit

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Debt Settlement

Understanding credit utilization

The pros and cons of skipping a payment

Keep an open line of communication with parents about their finances.

Make a Choice to Get Ahead Financially

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Should You Buy a Home Now or Wait?

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Americans spend more money eating out than on groceries

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How to Know if you are Ready for Home Ownership

When is the right time to buy a home?

You can improve your credit to buy a home

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The Hidden Costs of Payday Loans

Be Wary of Credit Repair Services

Use Caution when playing the credit card game

What does it mean to say bankruptcy gives you a clean slate?

How your credit is affected by various debt options

Be wary of predatory small business loans

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Financing a College Education

Money, Credit and Relationships

Should you be concerned with your date's credit scores?

Best options for a small, short-term loan

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Skipping a Payment over the Holidays

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The difference between paying bills and managing your money

My wife and I have gone through some tough financial times, which eventually led us to file for bankruptcy.  Following this experience, I don’t ever want to use credit again, but my wife

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Be wary of predatory small business loans

Q. I own a small business and frequently receive fliers from capital companies telling me I'm eligible for loans up to $100,000. One even stated that the fee was as low as 15% of the loan amount. My financial institution always wants so much documentation from me that I'm seriously thinking of taking out one of these loans. Are they as good of a deal that they appear to be?

A. You certainly aren’t the first business owner to be intrigued by these kinds of loan offers. Unfortunately, they reflect the old adage that if something appears too good to be true, it probably is. In fact, the loan you’re describing is typically what I consider predatory.  Capital companies can get away with predatory practices because the federal government doesn’t regulate these kinds of loans.

In many cases, the terms in these offers are far different than what is advertised, so you must be careful not to be lured in by what can end up to be misleading terms and conditions. In the offer you mentioned with fees as low as 15% of the loan, for example, it might appear that you’re getting the deal of a lifetime. But a 15% fee is not the same thing as an annual percentage rate of 15%.  In actuality, the fine print can reveal that a loan like you’re describing has an annual percentage rate of over 100%. 

Unfortunately, small business owners across the country are finding out how detrimental some of these loans are.  Some small business owners even find themselves in a position where they are unable to make the high loan payments, and end up closing their business as a result. 

To protect yourself against predatory loans, never sign a contract without reading all the terms.  Also, be sure to look at the Annual Percentage Rate, or APR, regardless of the length of the loan. (Short-term loans can appear to be a good deal, but may come with outrageous APRs.) If the loan documents don’t reveal the APR, then don’t sign them.  In addition to knowing the APR of any loan you take, you need to know the monthly payment required.  As a business owner, you will want to ensure that your cash flow allows you to make the new loan payments. 

It’s far safer to seek loans from a bank or credit union.  Though the amount of documentation can seem rigorous, your bank or credit union wants to ensure that your loan is good for you—and them.  In other words, they want to make sure you are able to make the payments.

It wasn’t that long ago that predatory lenders harmed many people in the mortgage market. It seems the trend is moving more toward small business owners. As a business owner, you put your heart and soul into your business. Protect that investment by being aware of potential predatory loans.

Bonnie Spain is the executive director of the American Center for Credit Education and Consumer Credit Counseling Service of the Black Hills. For more information, email

The material in this transmission is provided for personal, non-commercial, educational, and informational purposes only. ACCE makes no representations or warranties with respect to the accuracy or completeness of the contents of this transmission and assumes no responsibility for errors, inaccuracies, omissions, or any inconsistency herein. You should consult a professional where appropriate.