E303 - You’re Pre-Qualified for a 13% Loan! (That Really Costs 170%)

This week, we begin with the story of Paloma Corona, the owner of a thriving preschool in Los Angeles who needed money to expand to a second location. She thought she was borrowing at an annual percentage rate of 13 percent. In reality, the effective APR was 170 percent. She also thought she was taking out a loan. Instead, she was placed in a merchant cash advance—an increasingly common form of financing that can sidestep many of the laws governing traditional loans. The daily payments quickly began draining not only the profits from her business, but also her personal savings. Her bu...