How To Protect Your Small Business From Predatory Lenders

You have just ventured into a new business, and you started searching for the best interest rates online. You come across an astounding annual interest rate of 8%, and just when you feel satiated and sign up, you realize it’s actually 8% a month! Predatory loans such as this can make you feel down and out and can even throw you out of business, often before you put your foot forward. How can you avoid falling into the trap of predatory lenders? Read on.

Search For A Non-Profit Lender

Regulated non-profit lenders operate with small business owners and can finance them with an amount over $2,00,000, besides offering training and pivotal business advice. Non-profit lenders work in tandem with the U.S. Department of the Treasury’s Community Development Financial Institutions Fund and shell out inexpensive business loans. When CDFI lenders refuse to offer a loan, they make the entrepreneurs go through a counseling session regarding how to qualify for their next application within the impending six months.

Plan Out For The Road Ahead

Be on your guard in case you are growing too fast. Entrepreneurs, who have just set out with their business, must keep in mind that immense growth does not necessarily equate to the same amount of cash flow. Before contemplating expansion, a businessman must sketch out complete business analysis. Going ahead with a model cash flow will accentuate the possibility of a bank loan and help you in realizing the effect of new opportunities on your business.

Say ‘No’ When It Is Needed

At certain times, it is sensible to refuse business contracts. When a contract involves a good amount of investment in machinery, inventory, and additional labor but is unable to garner revenue over a long period, it’s in the best interest of the entrepreneur to turn the contract down until and unless appropriate financing secures the entity’s financial success.

Take An Equity Partner Into Consideration

Companies that have a massive growth opportunity and need urgent financing to capitalize on the moment might find it convenient to vend off a portion of their business. The majority of equity partners will ask for the same kind of elementary analysis that a bank would demand, and seeking out a perfect equity partner is rather time-consuming. So, planning becomes of vital importance.

Apply For An SBA Loan

SBA loans provide you with the best possible financing you need for your small business. The loans provide terms that can extend up to 10 years for equipment loans and general working capital, moderate down payment, and a rate of interest that is quite similar to the ones offered by banks on conventional loans. If your loan application fails to qualify, the specialists at SBA will advise you on how to boost up your business credentials or shed light on how to attain success with a future application.

Always Look For Reliable Alternatives

Don’t go for a loan just to make your business more competitive. Find out whether you have reliable or affordable options with you. Traditional banks list out a set of requirements that becomes impossible for a small business owner to satisfy. Online lenders don’t have a regulator to look over their functioning. And as a result of that, it becomes a cakewalk for them to take undue advantage of small businesses that are in grave need of capital. As entrepreneurs don’t have many lending options at their fingertips, it’s easy for these lenders to capitalize on their desperation.

Seeking out a non-profit lender will make you a level playing field, and of course, a suitable environment in which you can run your business smoothly. As of today, three out of four small business owners lend full support to the Consumer Financial Protection Bureau. It’s a federal agency that regulates credit cards, mortgages, and various kinds of financial products and services. Budding entrepreneurs are supportive of credit unions and small banks which play a major role in shielding them from predatory lenders. Remember that your business is your dream. Aside from working hard to come out with flying colors, you need to be cautious. Be cognizant of all the options. Analyze things before you jump on the bandwagon and fall prey to the predators. Be on your guard.