Predatory Small Business Lenders

Predatory Small Business Lenders

Written by Caitlin Wood
Last Updated January 15, 2016

As a small business owner, achieving the vision you have for your company by turning your idea into a thriving and successful endeavor is probably your ultimate goal. It is also more than likely that to do this, you will need to apply for, and then get approved for, a small business loan.

There are a plethora of lenders available for small business owners to choose from and with advancements in financial technology and the way money is lent, there is an option for every type of borrower out there (learn more about alternative business leaning). While the growth that the small business lending market has seen lately is great, it has also made it even more difficult for business owners to distinguish the fraudulent lenders from the predatory lenders.

A predatory lender is anyone or any financial establishment that preys upon those in need of money. A predatory business lender’s tactics are often abusive, unfair and manipulative. Their main goal is to mislead a potential borrower into a one-sided and deceptive deal.

If you are a small business owner who is currently looking for funding to help expand your business keep an eye out for the following red flags, as they are definite signs of a fraudulent and predatory lender.

Learn how to expand your small business with new capital.

1. Guaranteed Approval

Being promised guaranteed approval right away may seem very tempting as the approval process for a small business loan can sometimes be quite long. The problem is this guarantee is a straight out lie. No lender, no matter how much experience they have or how many business owners they’ve helped out can guarantee that they’ll approve you before they know anything about you or your business.

Lending money is in large part a calculation of risk; a lender will never lend money without first accessing the risk. While legitimate small business lenders are constantly improving their approval process, there is always going to be just that, an approval process.

Need more information about how to get approved for a small business loans? Click here.

2. Ridiculously Low Rate

Because of the every growing lending market, lenders are now able to offer competitive and often lower than average interest rates. However this does not mean that you’ll be able to secure a ridiculously low rate from a legitimate lender. If you find a lender that is offering interest rates that are significantly lower than all the other interest rates you’ve been offered, you need to beware.

Listen to your instincts, if you think it sounds too good to be true, it undoubtedly is. Always read the fine print before you sign any contracts, you may find that your lender is not being completely honest with you.

3. High-Pressure Tactics

Predatory lenders will often place a lot of pressure on potential borrowers, citing reasons like “you need to act now”, or “this offer won’t last forever”. Their ad campaigns are typically aimed at those who are more susceptible to making quick and unplanned decisions because of their desperation for financing. A financial crisis or an expected opportunity shouldn’t be the main criteria for choosing a lender, although this often does happen. We urge you to take the time you need to research the best small business lender for your unique financial needs.

Looking for a small business loan with no credit check? Read this article.

4. Down Payments or Upfront Fees

A legitimate and above the board lender will never ask you to give them money for a loan. The very definition of a lender is someone who lends or gives money, not someone who takes it (expect interest of course). A loan shouldn’t require a down payment or any upfront fees and you definitely shouldn’t be asked to pay a fee before your application is even approved.

5. No Web Presence or Appropriate Content

A reputable and legitimate lender will absolutely have a web presence and appropriate content for their current and potential new clients. Appropriate content typically means blog posts, videos and other resources that are brimming with great financial information. A lenders website should also be professional, well managed, well designed and easy to use and navigate through. There should be information about the lenders privacy policy and any legal requirements.

In a day and age where the average consumer or potential borrow does straight to the internet when they need something or want information about something, a lender’s website it typically the first interaction a borrower has with the company. Therefore the websites of most great small business lenders delivers, to potential borrowers, an overall image of the company.

6. No Address Provided

Now that we’ve just finished explaining how important it is for a lender to have web presence, it’s also extremely important that they have a legitimate address that coincides with a real location. Even if a lender is based mostly online they should have a physical address that they advertise on their website and will provide to you.

Applying for the Loan you Need

If you’re in need of a small business loan, the best thing you can do for yourself and your business is to find a lender who is not only willing to provide you with the financing you need but is willing to work with you to help you achieve your goals.

Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

Click on the star to rate it!

How useful was this post?

Research & Compare

Canada's Loan Comparison Platform

Largest Lender Network In Canada

Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.

Save With Loans Canada

Special Offers

Borrow $500-$50,000

Borrow $500-$50,000

Don’t pay until March with this offer from our partner, Fairstone.* Ends January 31st.

View Offer
Cashback & Bonus Offer

Cashback & Bonus Offer
Ends March 1st, 2023

New Offer! Get up to $2,000 cashback + a $50 bonus on signing up. Conditions apply.

View Offer
Earn 5% Cash Back With Neo

Earn 5% Cash Back With Neo
No annual fee!

Earn an average 5%¹ cash back at thousands of partners and at least 0.5%² cashback guaranteed.

View Offer
Build Credit For $10/Month

Build Credit For $10/Month

With KOHO’s prepaid card you can build a better credit score for just $10/month.

View Offer
Best Personal Loan Provider by Greedy Rates

Confidential & risk-free

All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan. Loans Canada is not a mortgage broker and does not arrange mortgage loans or any other type of financial service.

When you apply for a Loans Canada service, our website simply refers your request to qualified third party providers who can assist you with your search. Loans Canada may receive compensation from the offers shown on its website.

Only provide your information to trusted sources and be aware of online phishing scams and the risks associated with them, including identity theft and financial loss. Nothing on this website constitutes professional and/or financial advice.

Your data is protected and your connection is encrypted.

Loans Canada Services Are 100% Free. Disclaimer

Build Credit For Just $10/Month

With KOHO's prepaid card you can build a better credit score for just $10/month.