The Loans Canada team sits down with Gary Schwartz of the Canadian Lenders Association to talk about open banking.
Predatory Small Business Lenders
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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
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.
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