Borrower Beware: If It Sounds Too Good To Be True, Maybe It Is
Has your Business ever received a solicitation in the mail saying:
- You are “Pre-Approved” for a loan up to $100,000 or up to $250,000?
- You can have the money in ONE DAY.
- Rates as low as 3.49%
- Unsecured and no collateral needed.
What does pre-approved mean? Either you ARE approved or you are NOT. There is no in between.
If you are pre-approved, why do you have to fill out an application?
If you are pre –approved why do they need to pull your credit report?
If you have tried to obtain bank financing in the past, you know that getting financing for your business is not that easy and not that quick and not that cheap. Banks also require collateral. So why would a total stranger, who knows nothing about you or your business, offer you such a sweet deal?
Have you ever heard of “Bait and Switch” tactics in business? That is the best way to describe these types of marketing and sales practices.
Terms and Conditions
The reality is, IF you do qualify for any type of these offers from these companies, you will be subject to the following terms and conditions:
- Effective APR rates in excess of 50% per annum and sometimes more than 100% APR.
- You pay unusually large fees upfront to originate the loan.
- You give the company complete Power of Attorney to act on your behalf.
- They file a Blanket Lien on all your assets of the company until the loan is paid off. That also includes the cash in all your bank accounts.
- They ACH Auto Debit the payment DAILY from your checking account.
- The term is short — Usually 18 months or less. Usually less than a year.
- These Lenders get paid daily — meaning they are paid before your Employees (weekly), before your suppliers (monthly) and before your Secured Creditors (monthly).
These offers are coming in the mail, over the fax, and through e-mail. It seems to be the newest wave of financing for small businesses who are either new in business, do not qualify for conventional financing, or are so strapped for quick easy financing, that they only ask the question of, “How much?” and, “When?” They do not read the fine print and realize what kind of transaction they are getting into.
If you want to prevent creating a lending problem that you cannot afford to pay back, avoid lawsuits and trying to cure a problem after it is already created, give me a call and get the straight truth about all of these deceptive marketing promises that won’t deliver happiness or pleasure to your business.
Listen to Larry discuss this topic in more detail on the Financial Focus radio show.
Larry LaChance is president of Bankers Capital, located in Northborough, Massachusetts. Larry has been in the equipment leasing industry since 1983. Bankers Capital finances commercial equipment for small start-up privately owned companies all the way up to Fortune 500 corporations. Our expertise is creative, custom tailored programs to meet the cash flow needs of the individual business. We have provided financing to clients in 45 of the 50 states. We offer personalized service and quick turnaround times on all applications regardless of size.