Small business lending is more complicated than consumer lending.
Both have term loans and lines of credit but in small business you also have SBA loans, revenue-based financing, merchant cash advances, venture debt, equipment finance, invoice factoring, asset-based financing and more. This leaves a lot of room for unscrupulous lenders to charge hidden fees on some of these products.
This is why California passed Senate Bill 666 back in October which went into effect on January 1. It bans lenders from charging a variety of fees to small businesses (those companies with less than $15 million in revenue and less than 100 employees) in the state.
The new law does not allow ACH fees, account statement fees, lien termination fees, document preparation fees, risk assessment fees and undisclosed prepayment penalties.
With no national law for small business lending equivalent to the consumer Truth in Lending Act, progressive states like California are taking it upon themselves to build a robust framework to protect small business owners.
Featured
California law targeting small-business loan fees takes effect
By Jordan Stutts
The legislation is the latest step in California’s effort to crack down on high-cost small-business loans.
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