The Rhode Island Department of Business Regulation requires small loan companies to post a surety bond to receive their business license. The state defines a small loan lender as a business which offers consumer loans in amounts of less than $5,000. In addition, these loans cannot be backed by real estate.
Like other surety bonds, your small loan lender policy acts as a contract between three parties:
Your surety bond protects your clients and the state from any harm arising from misconduct or unlawful acts committed by your business.
The cost of your RI bond is based on several factors, including:
Rhode Island requires a base bond in the amount of $10,000. If your small loan company has multiple branches, you will be required to post an additional amount. You must increase your bond value by $10,000 if your business operates from 4 to 7 branch locations, or by $25,000 if your business operates from 8 or more locations. This means the total value of your bond can range from $10,000 to $35,000 depending upon your number of locations.
Regardless of the bond amount you must post, you will only have to pay a small percentage of the bond as an annual premium. This percentage varies based on multiple factors. One of the most important factors is your credit rating. Generally, premiums range from 1% to 15% of the bond value.
NNA Surety Bonds currently offers Rhode Island small loan lender bonds with annual premiums as low as $100, based on your credit.
Your small loan lender surety bond is different from an insurance policy. While your insurance policy is meant to protect your business, your bond policy protects your customers and helps mitigate harm to the general public. It does this by encouraging lawful practices by your loan company. Here’s how:
Upheld claims make obtaining future bonds challenging. Without posting a surety bond, you cannot continue to conduct business in Rhode Island, thus, jeopardizing your loan company. In this way, surety bonds help encourage best practices and mitigate damage to the public.
The most important reason for having a bond is because Rhode Island requires small loan lenders to post one. In many cases, regulations on lending are complex and commonly amended. A surety bond encourages lenders to both fully understand and remain current with state regulations while acting in the best interest of the consumer.
Questions? Call NNA Surety Bonds at 855-215-2160.