It’s no secret that small businesses have a hard time qualifying for traditional bank loans. For this reason, small business owners turn to online lenders to secure financing. In fact, traditional banks only approve about 19% of loan applications while alternative lenders approve 64%.
With the rise of online lenders or alternative lending companies, it’s not a surprise that some of them are illegitimate. To help you determine a legitimate lending company from a scam, here are six surefire signs you need to watch out for.
1. They Ask Money Upfront
No lender or loan broker should ask for money upfront. Your lender should be the one to compensate loan brokers by commission once the deal is done. Regardless of the reason – credit check fees, administration fees, etc. – you don’t have to pay lenders upfront. Lenders should never ask for significant upfront costs prior to approval. If any lender wants you to pay a down payment, you might want to look for another lender.
2. They are Unsearchable
You should be able to easily research legitimate lending companies. Aside from having a fully functional website, real lenders will have active social media accounts and authentic customer reviews. If the company you’re searching for doesn’t have much paper trail, either they’re new to the industry or they are a fraud.
3. Their Website is Unsecure
As you go about your search, see if their website is secured or not. A lender’s website should have a Secure Sockets Layer (SSL) Certificate, which guarantees that private information you entered is secure. If the website is not SSL certified, they could sell your information to a third party. A secure website should have the letter ‘s’ at the end of “https(s)” in the URL, as well as the lock icon before it.
4. The Loan Offer Sounds Too Good to Be True
If the loan offer seems too good to be true, then it probably is. While lenders compete with one another by offering better rates and loan terms, they have limits as to what they can offer potential clients. If a lender seems to be offering a really great deal, you have every reason to be cautious.
5. They Guarantee Approval
As tempting as it may sound, lenders cannot guarantee loan approval. When businesses guarantee something, they must follow through. Therefore, don’t trust a lending company that offers a guaranteed loan without even looking at your loan application.
6. They Don’t Have a Working Phone Number or a Physical Address
Illegal lending businesses usually use P.O. boxes and non-working phone numbers. Legitimate businesses should have physical offices and real phone numbers, as well as employees who actually answer the phone.
Guest post courtesy of Dominic Barrett. When shopping for loans and lenders, it’s better to be safe than sorry. If you’re looking for potential lenders, add SMB Compass to your list. We have funded thousands of small businesses in the United States. To know more about us, don’t hesitate to give us a call at (888) 853-8922 or email us at [email protected].