It’s a sign of the times. Some online loan companies are taking advantage of the desperate situation business owners are in. These predatory lenders get people into expensive loan contracts with little more than a signature. The effective interest rate is not usually clear and accumulates differently than a standard term loan, so the principal quickly becomes dwarfed by the ballooning interest. If you’re looking to get financing, it might be tempting to be drawn in by the easy process, not knowing the details of what the loan entails.
If you’re a small business owner who needs funding, here are a few steps you can take to make sure you stay on track:
Check with your current banker first. Many banks now realize business owners need quick cash and have streamlined their application process. All the financing you may need is a credit line or a separate credit card for your business. You will most likely have to guarantee payment personally, but it will be the quickest and most direct way to get financing for working capital or take on a big customer order or a new contract. If your banker doesn’t handle business loans or says you don’t qualify, go to step 2.
Contact a microlender listed in our Small Business Assistance webtool. Microlending is a safe alternative to predatory lending companies. The loan process can be handled online and through a phone conversation. Most microlenders are nonprofit organizations that get loan funds from government agencies or foundations, so they have funding to help small businesses. They’ll have flexible lending criteria for business owners working on improving their credit or lack personal assets or much business income yet. To find the right micro-lender, complete the easy form on the Microenterprise Collaborative’s website. You may also benefit from trying Step 3.
Make an appointment with a business counselor at either one of the Women’s Business Centers or Small Business Development Centers. A business counselor can give you advice about how to improve your financial skills or increase your sales so next time your business can you have the income and formal financial statements to attract more substantial capital from a traditional lender like your bank.
One of the lenders working with the Microenterprise Collaborative has assembled an informative toolkit to help borrowers determine if an online lender is right for them. Check out the document below provided by CDC Small Business Finance
Download this helpful guide: 10 Questions to Ask Before Committing to a Small Business Loan