Since the onset of the 21 st century, the various access to small business loans have flourished. From typical business loans offered by local banks, to the alternative lending space with thousands of online business loan lenders, today's small business owner has a plethora of financing options to choose from. Despite the massive amount of options available to receive business funding, research on choice difficulty seems to suggest that it may be even tougher to choose an optimal funding source from so many choices. Going off topic a bit, just think about how many dating apps and date websites there are today, although there's more single people than ever before and everyone's getting divorced. It's simply too easy to get a date, yet the easier it becomes, and the more options that exist, the tougher it becomes to actually find a quality person most people are in search of.
Even within each category of financing sources, numerous lenders propose different procedures, rates, and terms, which can be quite overwhelming for the borrower. Decision research shows that having too many options often reduces engagement and increases decision difficulty for individuals in general. You’ll know what I’m talking about, if you’ve thrown away that 10th credit card advertisement envelop in your mailbox. After a while, you can't decipher from one ad to the next, they all look the same.
There’s no denying that in the modern day we expect a lot. FASTER, CHEAPER, NOW, NOW, NOW. The Internet has opened up new vistas where anything seems possible: whether it's landing ourselves a date at a swipe, or trying to bag the best deals on travel comparison sites. Another page, another click, another swipe. Just keep looking and you'll find something better. But how many of us actually believe that? Is there a flip side here. What's regulated and what's not? Do you really know who's on the other end of the screen? Are the companies spending millions of dollars in marketing, even ethical? How much of what we read online is actually legitimate, or fake? Who's behind the 3,000-5,000 marketing ads we see every single day? Our need to always secure a better deal, or a faster option has made us more vulnerable, not least when it comes to being lured in by fake news, hollow promises and outright scams. Another words, the grass is not always greener on the other side; and relentlessly searching for "something better" may actually be doing more harm than good.
Moreover, the growth of online lending has resulted in the introduction of sub-optimal lenders that engage in less than ethical practices. Unfortunately, some lenders push small business owners to take on more credit than needed, or initially promise unsubstantiated terms and rates in a bait-and-switch scenario.
How to Avoid Small Business Loan Scams
Ever clicked on a banner ad promoting a $29 round trip to Florida, only to find out you still have to pay for bags, seats, airport fees, taxes, and oxygen? You may have even been online shopping for plane tickets and passed up another option for $79; after-all $29 sounds a lot better than $79. Right? But what if the $79 flight to Florida was actually $79, and the $29 not so much? You were so concerned about finding a better deal (saving $50) that you got duped into believing the fake ad, which wound up costing a heck of a lot more than the $79 ticket you initially passed up. Chances are, you missed the fine print because in your mind, you were fixated on finding a better deal. In an effort to save you a few bucks, you wound up spending twice as much. Take the bright shiny Cadillac that you see on the TV advertised for $129 per month. Do you think people really drive off the lot in a brand new Cadillac, paying only $129 per month? NEVER! Don't confuse a big marketing budget with an ethical company. More often than not, the bigger their marketing spend, the more BS they advertise. It's all smoke and mirrors, nothing more than an illusion. Another example is a very large furniture retailer in Metro Detroit, they spend millions of dollars every single month on television ads. Their main gimmick is that they pay your sales tax. Another words, you buy furniture from them, and they pay your tax. That's a huge savings! One of my friends just bought a couch from them, and when he went to pay, the tax was on the bill. Of course, he questioned it. Considering that's one of the reasons he went shopping in that store in the first place. The salesman said "comon' man, of course you have to pay your own tax; it's illegal not to." Soooo, let me get this straight.... Their main sales pitch / marketing gimmick, that they spend millions of dollars promoting, is not just completely false, it's completely illegal. Yet, they get away with it and people fall for it all day long.
This is exactly what's happening to THOUSANDS OF SMALL BUSINESS OWNERS in their never ending quest to find fast small business loans online. There are millions of websites, lending companies, online loan marketplaces, banner ads, links, videos, telemarketers, postcards in the mail, and business loan brokers all promising the lowest rate, largest loan amount, and best terms out there. But how much of that is actually true? NOT MUCH!! IN FACT, ABOUT 98% OF WHAT SMALL BUSINESS OWNERS READ ONLINE AS IT RELATES TO FAST SMALL BUSINESS LOANS, IS 100% FAKE NONSENSE! There is simply too much information out there, hundreds of thousands of small business owners are taking the bait, and getting burned real bad. In fact, people are walking away from reputable lending companies with fair rates & terms, in order to pursue loan sharks and even scammers in disguise. It's sad and getting out of control. The question we have is, why are small business owners being so careless, stubborn, and flat out gullible?
With no regulation whatsoever, most funding companies are nothing more than call centers, ran by aggressive salespeople with zero knowledge, background, or experience in business, and/or finance. In fact, most loan brokers and online lenders simply auction off your application to the highest bidder, all while destroying your credit. Small business owners are being misled at every turn, collecting fake loan quotes, comparing lending rates & terms that don't exist, clicking on banner ads for loan products they'll never qualify for, committing to funding offers that change at the last minute, and being duped into signing bait & switch funding contracts. What shocks us, is why millions of small business owners would risk their livelihood and put the future of their business on the line, just to save a few bucks - which will wind up being fake anyway. We have been funding small businesses for years, and we have never witness so many scams, lies, fraud, and businesses being forced into bankruptcy because they "bought" the wrong loan from the wrong lender.
Let’s take a look at how you can protect your business in the era of information overload by discerning the good business loan lenders from the bad.
Be wary of comparison sites
Lending comparison sites might look like an easy way to find the best deal but they can feature some disreputable companies all vying for your attention. Their information can also be misleading, so take them with a pinch of salt. For instance, they may advertise some of the lowest rates on their homepage but can’t always ensure lenders follow through. Just as an example, one of the largest online business loan lenders promotes rates as low as 9.9% AIR, but the fine print says (eligibility for the lowest rates is very limited, available only to businesses with the strongest creditworthiness and cash flows, and typically businesses that have shown an excellent payment history on prior loan products with this company. The weighted average rate for term loans is 25.0% simple interest and 47.3% AIR). Wow! So, those advertised rates are "very limited" and you have to be a recurring merchant of this online lender. Which means that if you may have to be a perfect borrower with them for many years, before you get their "best" rates." Another large online business loan lending company advertises "rates starting at 1.25% per month of the original funding amount." Well folks, that could be up to 200% interest in some cases. And, many of these online lenders can also get away with charging additional fees, which brings us to our next point…
Never pay upfront
The scams are those which charge you an advance fee and expect it to be paid upfront, before you receive any money. They might also masquerade behind names such as ‘credit fee check’, ‘processing fee’, ‘registration fee’ or any other form of down payment. If you pay up, you can kiss goodbye to your money and your non-existent credit, leaving you in a worse position than you were to begin with.
The more you "shop" for small business loans, the better rates and options you'll receive... Right?
Protect your personal information
Some scammers aren’t even after your money, they simply want to steal your personal information to sell it. If you're approached out of the blue by a company, never hand over your social security number, credit card number or bank account details as you could find yourself at risk of identity fraud. And seriously, in today's world of online scams, fraud, data breaches, etc., it's alarming that so many business owners are freely giving up their personal data to telemarketers and call center reps pitching business loans.
Spot the BS - AND THERE'S A LOT OF IT
If an ad, email or website tells you you’re pre-approved or promises to lend to you regardless of your financial situation, you’re in BS territory – a Blatant Scam. The reality is, anyone with a social media account, or a website, and a handful of dollars can publish whatever they want since this is an area totally unregulated, undercutting competitors by a serious margin if they think it’ll get you to take the bait.
Check out the lender
Reviews aren’t always reliable, and while a website might look welcoming, scammers know a good-looking facade often works. Look for things like genuine contact details (you should Google their HQ address to make sure it all adds up), security logos, etc. Even then, go to the online directory for that state and check the number corresponds to the business.
Shopping Online Small Business Loans and Merchant Cash Advance Lenders in 2018? Think Twice! (video)
Report unsolicited contact
If you receive an offer you never applied for via phone, SMS or email, be even more suspicious. Never use any links or phone numbers provided this way, even if it purports to be from a recognized lender; do your own research online. If you pass up an offer and still get bombarded with cold calls, walk away and report it. All those calls you get from telemarketers saying you are pre-qualified for $200,000 in fast business funding, they bought your name off a list, they don't have a clue who you are.
Reliable and experienced small business loan lenders have begun to focus on dealing with specific groups of small business customers, so as to provide a more prudent and specialized financing advice in supporting businesses’ initiatives for success. By better understanding the characteristics of industry-relevant financial statements and business models, such loan provider offers optimized funding solutions in a more efficient manner. Small business owners are finally coming around, realizing that those cookie cutter, one size fits all small business loans being sold all over the internet are counterproductive and potentially detrimental to their business. Small business owners face unique challenges that require the partnership of an experienced funding firm, not product pushers or telemarketers. Indeed, for small businesses, whether receiving funds from an angel investor or a small business loan from a group like LVRG, business owners will benefit from finding a lender that knows their businesses, and has their best interest at heart.
The reality is this, smart business owners don't chase fake business loan rates around the internet, they create funding relationships with an experienced finance company like LVRG.
As with everything in life, the same old adage holds true: if it looks too good to be true, it most certainly is! Your business is one of your most valuable assets, so don’t compromise it by chasing bogus offers. At LVRG, you can have faith in the due diligence we pay to each and every client relationship. We’ll never try to lure you in with a great deal and then move the goalposts. We provide fast underwriting and a complimentary cash flow analysis. Best part is, you never pay us a dime. If you want to work with a straight-talking strateigc funding source proven to help America’s small businesses succeed, then get in touch with us today.