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Ohio small business bankruptcy risk caused by unsound loans

Small business owners in Hamilton County could be at risk of a national trend involving business loans. Unless you own a business with a strong, consistent cash flow and years of financial statements to offer to lenders, getting a business loan from a bank can be a daunting experience that frequently ends with a rejection.

Businesses across the country have been brought to the brink of financial ruin by creditors who at first came to them with offers of loans to help them. Whether to improve cash flow or to expand market share, an infusion of money into a small business can look like a great opportunity. The problem is that too much debt or debt with high interest rates and unfavorable credit terms can leave a business struggling.

If accounts receivable collections do not continue at a steady pace, a small business could find itself unable to keep up with loan payments. Unsuccessful efforts to get creditors to engage in meaningful business debt negotiations can create a financial crisis for a business and leave an owner struggling for answers.

Consumer protection laws that require disclosure of credit terms including the true cost of a loan as shown by the Annual Percentage Rate or APR do not apply to most business-related borrowing. It is this lack of protection for business owners that that has prompted a call for guidelines for business borrowing that are similar to those now in place for consumer credit.

A source of information about small business debt and business debt negotiations is a Cincinnati attorney knowledgeable in bankruptcy law and business reorganization. Small business owners with debt issues might benefit from a consultation with an attorney to learn about available options.

Source: Ohio.Com, “Fast and easy loans come at price for small businesses,” Joseph Pisani, Oct. 1, 2015

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