Should you get a small business loan from a pawnshop?

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Source: St. Louis Fed, from “Wonkblog” in Washington Post

A recent article in the Washington Post asks the compelling question: Should you get a small business loan from a pawnshop?

“It’s a legacy of the financial crisis that hasn’t quite faded away: Banks are still hesitant to loan to small businesses, constraining the growth of a part of the economy lionized by politicians and the public alike. While these businesses often rely on credit cards to finance operations and expansion, that’s a risky strategy, given that they still don’t have the legal protections against fees and unannounced changes that were extended to consumer cards in 2009.

Could pawnshops be a good alternative?”

“Ideally a small business borrower works with a loan provider who can do more than just loan some quick cash,” says Norris Lozano, CEO of small business lender BusinessUS, “there is so much more to running a business, which an experienced lending team can provide.”

“So, who are these borrowers (sourcing loans from pawn shops) exactly? …  it’s the sole proprietor operating without much savings and not the best credit history who needs money fast, with no strings attached.”

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