Do Small Businesses Need Consumer Financial Protections?
Posted by: John Tozzi on October 16 In the aftermath of the crisis spawned by subprime mortgages, Congress is trying to create an agency to police consumer financial products. The latest reports sound like lawmakers are pulling the teeth out of it. But since there’s at least a discussion about how to regulate loans and other financial products sold to consumers, it’s worth looking at where small businesses fit in. When you look at how many small businesses participate in the financial system, they look more like consumers than like large businesses. Business owners usually have to personally guarantee their debts. The terms and rates that lenders offer them are influenced by owners’ personal credit scores, and loan defaults affect their personal credit as well. This is almost always true for sole proprietors and non-employer businesses, but even in LLCs or small corporations, owners’ personal finances are often entangled with their businesses. (Contrast this to larger enterprises: Does
