With big banks tightening credit, small businesses are increasingly being forced to consider private lenders, and their high fees, as a financing option.

The struggle for credit has led business owners who had never ventured outside the highly regulated world of banks and credit cards to seek often expensive relationships with all kinds of other lenders. Among them, so-called hard money lenders take personal property or the business itself as collateral. Others function like payday lenders, offering cash advances against a business’ anticipated revenue. There are also independent brokers, who put together applications for customers and seek loans from a variety of sources.

When a note came due on the trucking business that Thelma Standart owns with her husband in Wilmington, Calif., the couple needed more than $1 million dollars — right away. A bank loan fell through.

“We were forced to get a hard money loan,” said Standart, who now pays $14,000 a month on a loan that would probably have cost less than half that at a bank. “It’s bleeding our working capital.”

Click the link below for the complete article!

Desperate for capital, small businesses turn to private lenders