FINANCIAL

Are Predatory Business Loans The Next Credit Crisis?

By Liz Farmer
Governing.

Los Angeles restaurateur Jorge Rodriguez Assereto doesn’t need much sleep. He gets about five hours per night and the rest of his time is devoted to running Los Balcones, a successful Peruvian restaurant he opened in Hollywood in 2004 and recently shepherded through an expansion.

The remodel was a major investment. Assereto spent more than $130,000 over two years just renting the vacant space next to him while he tried to find financing for his expansion. He even switched banks in an attempt to get a loan. It didn’t work.
When he finally got the money, he hired a local design firm to turn the interior into a hip and rustic open space. He added liquor to the bar, hired two experienced bartenders and sent them to Peru to devise a new cocktail menu. But as the planned reopening date neared in early 2014, Assereto was running out of cash. He needed about $30,000 to stock his new bar and to pay for other supplies to fill out his larger space. Rejected yet again by his primary bank, he began to get desperate. Sifting through his junk mail, he pulled out one of the many solicitations he’d received from alternative lending companies. He made a few calls. The annual interest rates he was quoted were painfully high — as high as 60 percent — but Assereto saw it as his only choice.

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