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FINANCE: Online Lenders Offer Fast Cash at a Price
For the husband-and-wife team behind Kindred Bravely, an Oceanside-based e-commerce retailer of maternity clothing, it was their business success - not their struggles - that prompted them to turn to a well-known online lender.
Garret Akerson, who founded four startups before Kindred, his wife Deeanne's brainchild, said the simplicity of the process was appealing.
"You can get funds within a week, whereas (the U.S. Small Business Administration) is going to take three months," he said.
But as the Akersons discovered, that fast cash comes at a price: high interest rates that can quickly become crippling, threatening the financial stability the business sought in the first place.
Apparently, the couple is not alone.
Fast Cash
An increasing number of businesses are getting tripped up, many of them because they don't understand the terms of the loan, especially the annual percentage rate (APR), said Chuck Sinks with CDC Small Business Finance. one of the country's largest Small Business Administration lenders.
"There aren't a lot of finance majors out there that stop and put a calculator to this, and even those who are skilled at it, it's very difficult to suss your way through all the variables to get a general idea what the APR is of that money," he said.
One business owner told him she found it nearly impossible to resist offers of quick cash to tide over her struggling business.
"The money is there the next day, so they'll pay anything to get it, or they don't know what it...