Larry King would like to help you get a small-business loan. “Go online, complete a simple application, and you can get pre-approved for up to $250,000 in minutes,” he says in television commercials that have been airing on cable networks since June. The company he’s promoting, LendVantage, doesn’t actually make loans. Based in Henderson, Nev., it collects information from would-be borrowers and sells the names to lenders who specialize in funding merchants that banks consider too risky.
Those loans often come at a high cost. The LendVantage website includes the example of a business called Sally’s Friendly Cafe, which gets a $25,000 advance to build an outdoor patio. Sally’s agrees to repay $33,500 by diverting a portion of daily sales to the lender. LendVantage projects the business will pay $225 each weekday for about 30 weeks. Based on those terms, the cost of capital is equivalent to a loan with an annual interest rate north of 100 percent. The average APR for a business credit card is 16 percent.