SPRINGFIELD, Ill. (WAND) — A large coalition of small businesses, nonprofits and advocates wants state lawmakers to pass a bill this spring to create loan transparency for small business owners. This comes as Illinois small businesses lose roughly $450 million each year due to triple-digit interest rates on loans.
People looking to buy a house or car usually talk with their bank about taking out a loan to help finance the purchase, and customers receive an annual percentage rate for paying off that loan. We are able to receive that information due to the federal Truth in Lending Act, but small businesses don't receive the same benefit from non-bank lenders.
"In 2023, a growing number of business bankruptcies were directly tied to merchant cash advances and similar products," said Rep. Kam Buckner (D-Chicago). "These are often short-term high-cost loans that drain cash flow and trap businesses in redundant cycles of refinancing."
Buckner told WAND News small businesses in Black, brown and low-income communities are often hit the hardest by high interest rates. He said minority-owned businesses are significantly more likely to turn to online and non-bank lenders because the front doors at banks are frequently closed to them.
The APR for All legislation would require Illinois to have a universal standard for price comparison.
"Two other states have passed similar legislation — New York and California," said Woodstock Institute President and CEO Horacio Mendez. "They're not exactly small states with just a handful of small businesses. There was no financial Armageddon. People figured it out and businesses have flourished."
However, this is the fourth time lawmakers have tried to get the loan transparency plan passed in Springfield. Powerful credit unions and bank lobby groups have convinced enough Democrats to pause action on the bills each year.
Advocates believe it is past time to help business owners struggling to get by.
"We need to make it easier to level the playing field through our policies for small businesses to start up and grow, considering how federal policies, high inflation rates and tariffs are making it more difficult to be an affordably run small business," said Small Business Majority Senior Fellow Geri Aglipay.
This bill has 10 Democratic co-sponsors in the House, but it has not been assigned to a committee at this time. State representatives are scheduled to return to Springfield on Feb. 17.
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