Many business leaders attribute their success to caution. They are extremely careful when it comes to decisions that have the potential to put their businesses in jeopardy. Unfortunately, choosing the right business lender or business financing company to borrow from is one of those decisions. The undeniable existence of financial institutions and brokers that profit off the financial destruction of small businesses has taken a real toll on the business financing industry’s reputation. Fearful perceptions likely became more widespread following the recent influx of online business lenders. “Just more companies trying to rip you off in different ways,” a decent portion of business leaders probably thought to themselves.
Companies like United Capital Source feel that it’s their responsibility to help business leaders discern a true partner from a malicious bully. Here are 6 characteristics of institutions that fit this description:
An early indicator of a business financing institution that does not have your best interests in mind is only asking about numbers. When the majority of our competitors speak to potential applicants, they don’t ask about the nature of their businesses or the source of their financial troubles. They ask about figures and why their credit score or cash flow isn’t in perfect shape. Going a little deeper, however, might reveal that the financial discrepancy at hand was not the business leader’s fault.
You cannot effectively solve a problem if you aren’t aware of the root cause. Learning more about a business leader’s day-to-day experience might tell you that despite what the numbers tell you, this individual’s life is too chaotic at this time to take on the type of business loan they originally requested. Besides, allowing people to speak openly about their passions makes them more relaxed and less likely to commit careless errors or forget crucial information.
Let’s say your business earns $100 per week. The business lender you are speaking to knows this but offers you a loan that will charge you $150 per week to pay it back. Taking out a small business loan is not likely leasing a car. The person you are doing business with knows exactly how much money you have and how much you can afford to pay in a given time frame. Yes, a business loan is supposed to increase revenue, but a trustworthy business financing institution will present options that your current revenue is capable of supporting. There must be a valid, logical explanation for the proposed rates and terms.
A common tactic for drawing a quick profit off an unsuspecting business is issuing loans that are substantially lower or higher than what the business actually needs. Sometimes, what the business needs is different from what has been requested by the applicant. It’s the business financing institution’s job to bring the applicant back to reality and only present loans that the business can afford to pay back and will give their cash flow the boost they are looking for. Trustworthy business financing institutions are realistic about costs as well as budgets. They’ll tell you how much money you’ll need to get through a slow season, or simply how much you’ll be able to pay each month without having to dip into operational funding.
Every veteran business leader knows that pressure and deceit go hand-in-hand. If a sales representative is clearly pressuring you to accept an offer, it’s probably an attempt to avoid answering questions that will instantly kill the deal. Taking out a small business loan (or any form of considerable debt) is a major decision, so you should be able to take as much time as you want before accepting an offer. Such decisions should therefore be made when you are not in the middle of a typically hectic work day. When you aren’t in the right mental state, you could be lured in by a tempting feature, like “0% interest” or neglect to ask about crucial factors, like fees.
It is apparently acceptable for companies to only reveal their fees if the potential customer asks about them. While potential borrowers are always advised to ask about fees (no matter who they are on the phone with), a trustworthy business financing institution does not deliberately gloss over basic fee policies. One example is prepayment fees, which are not uncommon but high prepayment fees can significantly increase the loan’s overall cost. Then same can be said about additional fees for refinancing or customizing an existing loan. If you wish to pay off your loan early or modify its terms, you should only be charged if you were previously informed about this policy.
Reliability is a key component of trust. The business financing institution you choose should therefore be available to talk and get back to you promptly. You shouldn’t only be able to speak with the institution during certain times of certain days. When you have a question, you shouldn’t have to wait several days for an answer. At United Capital Source, we often speak with clients when it is most convenient for them, even after normal work hours. Business leaders are notoriously busy, so the longer they have to wait for information, the more stressful their day becomes.
Now that you know the characteristics of a malicious business financing institution, you should feel free to see if every potential partner you talk to matches any one of them. A trustworthy institution will have no problem reassuring you that they are not in the business of manipulation or deceit. Answering a short list of questions is a relatively small price for a lifelong partnership.
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