For Immediate Release: 
May 23, 2024

Isabelle Dienstag | (224) 619-9001

The following is a statement from the coalition of supporters for The Small Business Financing Transparency Act (SB2234 – Belt/Tarver) disputing misinformation from opponents of the bill:

“Unfortunately, high-priced lenders (a.k.a. ‘financing companies’) that oppose the Small Business Financing Transparency Act are circulating misinformation about the supposed impossibility of disclosing an APR for revenue-based financing (a.k.a. ‘sales-based financing’). 

“APR is simply the price of a loan expressed as an annualized percentage, i.e., the yearly cost of the loan. Lenders obviously know the price of their own products.

“Disclosing an estimated APR based on future revenue is not a new concept. Federal regulations pertaining to consumer loans account for the need to estimate APR under certain circumstances. For example, in income share agreements and refund anticipation loans, the lender knows how much it expects to earn on the loan and calculates the APR based on its expectations of the amount and the timing of the payments. 

“A more plausible reason for not disclosing APR is because the opponents don’t want their borrowers to know when they are being charged in excess of 100% APR.

“Not only has this subject already been thoroughly reviewed in the Senate, where it passed 36-19, but it’s already law in California and New York. Furthermore, when merchant cash advance lenders sued after California passed its legislation, a federal judge upheld California’s small-business lending disclosures. The lawsuit was not even based on the Illinois oppositions’ current misinformation, which would have been quickly dismissed; instead, the lenders tried to make a first amendment argument that disclosing the APR would violate their right to freedom of speech. The judge in California shut down this argument by ruling that an Estimated APR disclosure is ‘purely factual, noncontroversial, and significantly related to a government interest.’

“In 2021, the Illinois Legislative Black Caucus’s Economic Access Pillar significantly elevated Illinois’s standing for consumer financial protection. The Small Business Financing Transparency Act is the natural extension of that work considering that businesses in Black, Brown, and lower income communities are disproportionately driven to the ‘nonbank’ lenders that the bill would cover. Empowering entrepreneurs to make informed decisions about their businesses is good for small business, and thus, good for our state’s economy.”