Commercial finance companies usually charge a higher interest on secured short-term loans than commercial banks because the finance companies generally end up with higher-risk borrowers.

Question

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Commercial finance companies tend to serve borrowers who are considered riskier, such as small businesses or businesses with poor credit scores. As a result, they charge higher interest rates to compensate for the greater risk they take on when lending money. Commercial banks, on the other hand, typically have lower risk borrowers and can therefore afford to offer lower interest rates.

Commercial Finance Companies Usually Charge a Higher Interest on Secured