Small Business Financing can be a great option for springboarding to greater success, even it is in the form of “debt”. Unfortunately, a growing number of illusory individuals and companies aim to take advantage of vulnerable small business owners.
But there are plenty of legitimate and reputable capital funding options that can help small business owners achieve their long-term goals. If you are planning to apply for financing, be wary of these four red flags that your exciting funding opportunity may actually be a dangerous scam.
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Upfront “Advance Fee” Just to Apply
No lender, broker, or loan officer should ever ask you for money upfront. Period.
An advance-fee—also sometimes called an application fee, a finder’s fee, or a fee to get started—is one of the most common business scams out there today, according to the Better Business Bureau. For some loans, you may have to pay what’s known as an origination fee. Good lenders won’t charge you this fee until you enter into the loan agreement.
If in the process of applying for a loan you’re asked for a down payment, a registration fee, a credit check fee, or any other form of upfront financial contribution, don’t be surprised if you never hear from the broker or your hard-earned cash-ever again.
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A Loan Offer that Comes Via a Cold Call
If you receive an unknown call, offering you low-cost financing and trying hard to convince you to accept the loan, it’s a good bet that their offer is actually predatory. This kind of cold call often happens immediately after a business owner takes out a loan. To avoid this kind of scam, instead of letting another lender follow-up with you to try and plug your funding gaps, look into a loan renewal with your primary lender instead.
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A Promise of Guaranteed Approval
No legitimate lender will guarantee your loan approval before you have applied. Period.
If any person guarantees that you will qualify for a loan before having received your application and reviewed your financials-especially with such promises as “regardless of low or no credit”-you can assume that they are up to no good.
Trust your gut. If you get a bad feeling or are uncertain about a certain operation, contact the Better Business Bureau in your state for more information.
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Too-Good-to-Be-True Terms
It’s sad to say, but if a loan or service sounds too good to be true, it probably is. But if you’re new to the world of business financing, you may not know what that looks like. Lenders are competing with each other and are constantly trying to offer better rates and loan conditions to attract more business, but they have limits as to what they can offer without losing money.
If there’s one lender that seems to be offering a deal that exceeds other deals, you may have cause to be suspicious.
Don’t rush to get a business financing because there is always a risk in taking debt so never take the risk lightly. Instead, seek more helpful financial advice, let the FAS, Enrolled agent help you, contact us today at admin@fas-accountingsolutions.com or 832-437-0385.
