Now Businesses Are Getting Screwed By Subprime Loans

Subprime loans. Remember those? The high-interest loans to people with bad credit that successfully brought down the entire economy when banks started handing them out too freely during the housing boom. They're back! With a new class of recipients.

Bloomberg today reports on the booming popularity of subprime loans for businesses—"loans with annual interest rates as high as 125 percent." It's not just poor individual suckers who can get crushed by usurious lending rates any more! As yield grows harder to come by on Wall Street, major players (including Google and Goldman Sachs) are looking to this outrageously exploitative field. It is essentially payday lending for small businesses. Bloodsucking the poor and desperate is always a viable growth area in finance. From Bloomberg:

"This is the new predatory lending," said Mark Pinsky, president of Opportunity Finance Network, a group of lenders that help the poor. "And the predators, just as they did in the mortgage market, have gotten increasingly aggressive."

Subprime business lending — the industry prefers to be called "alternative" — has swelled to more than $3 billion a year, estimates Marc Glazer, who has researched his competitors as head of Business Financial Services Inc., a lender in Coral Springs, Florida. That's twice the volume of small loans guaranteed by the Small Business Administration.

With the caveats that this is all technically legal and that the scale of it does not approach the systemic threats posed by the boom in subprime mortgage loans prior to the 2008 collapse, we will note that this entire industry is disgusting.

The Bloomberg story is a great profile of one player in this disgusting industry. Check it out.

[Photo: AP]