Banks have traditionally made good money by providing loans and services for a reasonable price that’s negotiated with their customers. Regulations have made full rate disclosure the law of the land, lest customers misinterpret (or banks mislead them) about the true cost involved.
But many new non-bank lenders have arisen who don’t have the regulatory impetus to be transparent about their dealings. Recently, Ami Kassar has written a number of WSJ articles about the high costs of these non-bank loans as well as the need for more transparency by the source as to their real costs.
Bob Coleman confronted some of these lenders face to face at the New York Federal Reserve’s small business lending summit to press them on the excessive loan charges.
Maybe you should have a talk with your clients about PRT (principal x rate x term). Understanding how to figure their real borrowing costs might lead some of them to make better financial decisions, but at least they will begin to understand the grand bargain they get by being able to qualify for your loan.
A novel solution to this lack of information was devised by Brian Page, an Ohio high school finance teacher, who took students on a field trip to visit pawn shops, pay day lenders and check cashing stores in their city. Suffice it to say that some of these students came away understanding finance better than some folks that qualify for million dollar SBA loans.
Overcoming these kinds of barriers to success for our clients will populate our prospect lists with more qualifying clients.