Loansharking is the provision of money at a high interest rate to people who for a variety of reasons have little choice but to go the streets in search of financial support. In contemporary American society, there are many situations in which individuals and businesses may have to find illegitimate forms of capital. A business may have "tapped out" all its available sources of legal credit and not be able to get more money from a bank or from suppliers, a rather common occurrence in some industries, such as the garment and fur trades. Individuals may also find their sources of legitimate credit overextended or may find themselves with a financial problem that is not easily remedied through legitimate sources, such as a gambling debt, the need for money to invest in commodities for resale (i.e., cocaine), and the like (Simon and Witte, 1982: 229). For these people the loanshark provides a ready source of cash although with a high interest rate and a repayment schedule requiring rapid repayment of at least the interest on the loan.
For small loans the normal repayment schedule is twelve weeks, and the normal interest rate is 20%. This means that if a borrower obtains $1,000 from a loanshark, he or she is expected to make twelve weekly payments of $100. For larger loans, for example loans in excess of $20,000, the interest is rate is considerably lower, usually about 1% (Reuter, 1983: 96-97).
Movies and television programs often depict loansharking as a violent, brutish business in which unsuspecting borrowers find themselves in a desperate attempt to repay a loan on which "their body" is the collateral. In reality most loansharks eschew the use of violence as counterproductive. Several reasons can be given for this. First of all, violence inevitably attracts law enforcement attention, which is not good for business. Second, a disabled or dead borrower is unlikely to repay any part of the loan; therefore, violence makes little financial sense. Instead, loansharks tend to rely on collateral, much the same way as a legitimate lending institution (Reuter, 1983: 98-99). They may accept part interest in a business, a car title, jewelry, or even a home deed as collateral on a loan.
In a loansharking syndicate, even at its most complex, vertical differentiation is determined by available capital. At the top is the financier, that individual who supplies money to the loansharks, who in turn "put it on the street." The expectation is that at a specified time that money will be returned with an appropriate profit (Reuter, 1983). In the 1960s in Philadelphia, three major loanshark financiers were active: Willie Weisberg, Frank Jaskiewicz, and Angelo Bruno. They dominated the organization of loansharking because they controlled the flow of money. They supplied capital to the loansharks and expected a 25% return on their investments a year later. These loanshark "bankers," for want of a better term, then supplied money to smaller entrepreneurs on the streets who made loans to gamblers, businessmen, and others at usurious rates of interest (Pennsylvania Crime Commission, 1970; Potter and Jenkins, 1985). It was at street-level, essentially the bottom of the organizational pyramid, that the problems of contacts, collections, collateral, and negotiation occurred. The accrued profits simply flowed back up the money trail. It should be realized that most loansharking operations are even simpler than this arrangement, but the point is that the supply of capital financing dictates the structure and definition of positions in the syndicates (Rubinstein and Reuter, 1978; Jenkins and Potter, 1986).