Colorado Small Businesses Strongly Oppose Raising Loan Interest Rates
Colorado small business owners soundly reject efforts to increase the interest rates lenders can charge on certain consumer loans, and the results of a new Small Business Majority poll of state small business owners strongly suggest state legislators who support such increases would pay the price at the election booth. According to the scientific poll, an overwhelming 90% oppose allowing lenders to increase the interest they can charge on a $3,000 consumer loan from 28% a year to 30% a year and allow increases based on inflation for each subsequent year. More than three-quarters (76%) strongly oppose it.
Figure 1: Small business owners overwhelmingly oppose proposed legislation that would allow lenders to increase interest rates on consumer loans
These loans are typically those offered to people with weak credit or other issues that make such loans riskier, but the loan sizes could be appealing to small businesses. According to the poll, 62% of the small business respondents say small business owners would consider taking a consumer loan of $1,000 to $10,000, the loan size typically offered by such lenders.
Figure 2: Small business respondents say small business owners would consider taking a consumer loan of $1,000 to $10,000
Despite a veto of similar legislation by Gov. John Hickenlooper last year, legislation on this issue is again being debated by the state legislature. Small business owners in the state think such interest rates hurt all small businesses, not just those in need of financing. Seventy-four percent of small business owners agree that higher rates mean less profits, difficulty creating new jobs and less money for small business owners or their employees to spend at other small businesses. What’s more, small business owners are concerned about how raising interest rates on such loans could negatively affect their employees. Eighty-three percent of small business owners agree that moderate and low-income people employed by small businesses could seek a loan from these types of lenders and that raising interest rates will increase the financial strain on those that can least afford it.
After learning more about the proposed legislation, including arguments in favor, small business owner opposition stayed firm with 89% continuing to oppose it.
76% of respondents would be less likely to vote for a state representative who voted to increase the maximum interest rates lenders in Colorado can charge—51% of them, much less likely.
On a different issue, 71% of small business owners surveyed support a change in Colorado law that would limit the Annual Percentage Rate lenders can charge on payday loans to 36%. Payday lenders in Colorado currently charge annual percentage rates of more than 120% on payday loans.