The vast majority of small business owners have one goal in mind: advancing their business. They do not have the time or headspace to investigate all the different types of financing or to understand what each lender may be offering. That’s where the Small Business Truth in Lending Act comes in. The bill aims to protect small businesses by providing transparency and uniformity when choosing a financial provider.
What is the Small Business Truth in Lending Act?
On December 23, 2020 the New York State Senate Bill S5470B was signed, commencing a major development for small business owners. The act necessitates that specific providers of commercial financing must disclose particular details about their proposal to the recipient. This includes terms such as amount financed, annual percentage rate (APR) and prepayment costs, to name a few.
Simply put, commercial financiers will be obligated to use clear and simple language when offering a proposal to a potential client. Any charge that may have been “hidden” in the past is now to be disclosed, so recipients will have full knowledge of the financial decisions they may make. For instance, a financer will present any penalty of a late payment fee so the client will clearly know the consequences of a payment not made on time.
How will the Bill Protect Small Businesses?
Foremost, the bill will eliminate any chance of a small business owner being subjected to unknown charges, potential issues with the financer or signing an obscure contract. All commercial business lenders will be compelled to use standard terms when presenting their financing options. This will ease the comprehension issues that some small business owners were faced with in the past.
Additionally, this will empower small businesses owners to make the proper financial decisions for themselves. They will not be influenced by incomprehensible wording and they will know all the details of their potential loan, disclosed and upfront. Not every business owner starts off with all the specific knowledge that is needed when choosing a financial provider. This will give them the ability to know the relevant questions to ask, and ultimately which lender to choose.
During this challenging time in the world, small businesses deserve to be protected and only deal with transparent lenders. When the law is in effect, small businesses in New York are expected to save millions of dollars. Hopefully this act will help small business owners make better financial decisions and eventually put more money in their pockets.
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