Westchester small businesses deserve truth in lending BY KIM JACOBS
Sam Buckley, Executive Vice President New York Brokerage Services NEWMARK KNIGHT FRANK
Adam Ifshin, Founder & CEO DLC MANAGEMENT CORP.
Geoff Flournoy, Co-Founder & Managing Partner BRP COMPANIES
H. Guy Leibler, President SIMONE HEALTHCARE DEVELOPMENT
Bonnie Silverman, CEO SILVERMAN REALTY GROUP
GOLD SPONSORS DLC Management Corp./ MacQuesten Development, LLC/ Saber Real Estate Partners / RPW Group
SILVER SPONSORS Benchmark Title Agency / BRP Companies/ DelBello Donnellan Weingarten Wise & Wiederkehr, LLP / George Comfort & Sons / Ginsburg Development Companies/ LMC, A Lennar Company/ M&T Bank/ PCSB Bank / Silverman Realty Group/ Simone Development Companies
OCTOBER 26, 2020
magine you launched a branding and marketing company in 2019. Everything is going great — until a global pandemic breaks out. You need some help with your cash flow and turn to an online lender. What could go wrong? In Westchester County, one of our clients found out the hard way how predatory lenders are taking advantage of small businesses hit hard by Covid-19. Today, state law does not require all financing companies to clearly disclose pricing and terms to small-business borrowers. Fortunately, in July, the New York state Legislature passed the Small Business Truth in Lending Act — requiring clear and comprehensive disclosures from all lenders. It awaits Gov. Cuomo’s signature. This bill goes a long way toward addressing the issues of the deceptive Merchant Cash Advance (MCA) industry and other online lenders. Unfortunately, many small businesses, desperate to stay afloat during the pandemic, have turned to merchant cash advances. These cash advances are a lot like now-illegal payday loans for consumers. MCAs are not required to disclose annual percentage rates to borrowers, leading small businesses to take on unaffordable debt unknowingly, when they might have used a credit card or other lower-cost financing option. Community Development Financial Institutions (CDFIs) like Community Capital New York (CCNY) often help businesses get out from under crushing MCA debt. We know too well how harmful these products and other high-cost financing can be for small businesses, particularly during a crisis. Small businesses deserve straightforward disclosures from all financing providers so that they can make informed decisions and avoid debt traps. In Westchester, one of our clients needed a loan to pay members of his team as anticipated payments from his clients stretched out past 30 and 60 days. He borrowed money from an online source that didn’t disclose the cost of the agreement. Weekly repayment withdrawals of $1,200 from his bank account put him in worse financial shape than he was before. In fact, overall interest on the loan was more than 50%. That’s when CCNY stepped in. We gave our client a better understanding of the terms of his previous agreement and he applied to us for a loan with clear repayment terms. Our CDFI loan paid off the high-interest loan and got his bottom line back on track. This affordable financing allowed him to keep his business going and support his employees and his family.
The New York Small Business Truth in Lending Act was endorsed by a wide range of lenders and small-business advocates, including the New York State CDFI Coalition, all members of the state Senate’s Westchester County delegation and co-sponsored by Assemblywoman Sandy Galef. It’s a crucial next step in protecting businesses from additional harm during these especially uncertain times. Annual Percentage Rate (APR) disclosure is a common-sense transparency measure that would help small businesses make informed decisions, according to multiple Federal Reserve studies and industry regulators, academic researchers, advocacy groups, civil rights groups, and small businesses themselves. The legislature agreed, passing the Small Business Truth in Lending Act with overwhelming bipartisan support. Small businesses account for the vast majority of New York’s businesses and employ over half of the state’s workforce. They are closing in record numbers due to Covid shutdowns. The provisions in this bill would deliver significant savings for small-business borrowers. The Responsible Business Lending Coalition estimates that the Small Business Truth in Lending Act will save New York’s small businesses more than $369 million annually in unnecessary finance charges. Minority-owned small businesses alone could save as much as $130 million a year. My parents came from very modest backgrounds to become solidly middle-class owners of a nice home and a prosperous small business. Growing up I remember them often commenting about what a huge difference it would have made to them in life and for their prosperity if they could just have gotten their hands on $10,000 when first starting out. But what if that $10,000 had come from a Merchant Cash Advance lender, stripping wealth rather than building it? Fair and honest lenders have nothing to fear regarding transparency and the adoption of standard terms to describe the cost of loans. That’s why we’re urging Gov. Cuomo to help protect the small businesses in our state that are already overwhelmed dealing with the impacts of Covid-19 by swiftly signing the Small Business Truth in Lending Act into law. Kim Jacobs is president and CEO of Community Capital New York in Elmsford. She can be reached at 914747-8020 ext 112 and firstname.lastname@example.org.