What Small Business Owners Need to Know About Discriminatory Lending

In an ideal world, everyone should have a fair shot in asking for a loan. We can't deny the fact that loans can spell the difference between growth or deterioration especially in the small business enterprise. However, this is not an ideal world that we live in and there are some practices which may deter business growth and expansion. One such practice is Credit Discriminatory Lending or redlining.

In a nutshell, redlining is when banks and other lending institutions denies credit to individuals and businesses because of ethnic background or neighborhood. This practice goes against the Federal Fair Lending & Credit Practices. That said, there are provisions in the Equal Credit Opportunity Act which every entrepreneur need to know:

1. The lender (i.e: the bank) has an obligation to notify the borrower (aka: you) of the development or progress of your application. The usual processing time is 30 days after the lender receives your application.

2. If in case your loan is denied, you should receive written notification of the reason why it was denied or refused or if there's any change in the terms of your loan.

3. Finally, if the lender has failed to comply, then they would be subjected to punitive and actual damages.