Partnership Formed to Protect Latino-Owned Businesses from Predatory Lenders

Partnership Formed to Protect Latino-Owned Businesses from Predatory Lenders

Latino entrepreneurs

Latino entrepreneurs should stop having to depend on seed funding from friends and family and should start being able to access capital like the rest of the small business community. Carlos Medina and Doug Naidus certainly think so, and their respective organizations have partnered to provide Latinos access to the capital they need to start and grow their businesses. Medina is the chairman of the Statewide Hispanic Chamber of Commerce of New Jersey (SHCCNJ), a nonprofit organization committed to expanding business opportunities for Latinos across the state. Naidus is the founder and CEO of World Business Lenders, a national alternative business lender located in Jersey City. Together they are committed to ensuring that communities of color are not left behind.

New Jersey is working to revitalize its small business sector. Meanwhile, Latinos are turning to entrepreneurship in record numbers, and not just in New Jersey.  Across the nation, 25% of new businesses are Latino-owned, contributing $700 billion in sales to the economy each year -- $20 billion of that is contributed to New Jersey’s economy annually.

The problem is and always has been access to capital. It is what allows entrepreneurs to start and grow their businesses. From there, they may attempt new ventures or invest in new equipment. Yet, according to the Stanford Latino Entrepreneur Initiative, Latino-owned businesses face higher growth barriers than white-owned businesses. Why is that?

On one hand, reports from the New York Federal reserve show that these businesses are applying for financing more frequently than Caucasian-owned businesses. The problem is that they experience funding shortfalls more often. Another problem is that Latino entrepreneurs still believe that financing at acceptable terms is unavailable to them.  Both of these statements are true, despite New Jersey’s 120,000 Latino-owned businesses.

Naidus admits that alternative business lenders have been the cause of some trouble. He and Medina assert that it is time for the state and federal governments to put more stringent laws in place to regulate the behavior of alternative business lenders.  These are lenders that fill the void left by institutional investors that avoid small businesses. They take advantage of borrowers, in a predatory fashion, hence the reluctance of communities of color to participate in financing.

Unfortunately, these entrepreneurs are right. In recent years, institutional investors have retreated from providing capital to small businesses, which has allowed alternative business lenders to fill the void. Many of these lenders operate in a manner that leads to predatory behavior that is both opaque and unfair to the borrower. No wonder that communities of color, which are already disadvantaged when it comes to accessing capital, are reluctant to participate.

That is why World Business Lenders and the State Hispanic Chamber of Commerce of New Jersey (SHCCNJ), have partnered on this initiative. Their plan is for the SHCCNJ to establish and administer a loan program for the sole purpose of making low-cost capital available to its members. As advisor, co-sponsor and servicer, World Business Leaders will lend start-up capital to the program. It will also work with the SHCCNJ to secure commitments from other sponsors. Finally, it will provide on-the-job training for loan program representatives.

The program will utilize World Business Lender’s existing infrastructure, which it will contribute at cost. This will ensure that loans are fair and transparent, according to its own self-imposed best practices approach. For the future, this partnership plans to continue supporting a greater legislative framework for alternative business lenders and urging lawmakers in Washington and Trenton to strengthen relations for the industry. Until then, business owners of color in New Jersey should remain safe from predatory lenders.

The Law Office of H. Benjamin Sharlin LLC

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