As banks become more conservative in their lending practices many business owners are turning to alternative lenders to meet their financing needs. Business owners can quickly be overwhelmed by all the web-based business lenders. Many of these lenders will deluge a business owner with requests for bank statements and offers to take money today. Some of these lenders are backed with Wall Street money and they each try to have the flashiest website offering easy money today. But “if it is too good to be true then it probably isn’t true”, is a warning every business owner should heed.
Business owners are being pressed to find additional financing as prices or raw materials continues to climb, at the same time when demand for both goods and services is growing. But moving too hastily can leave the business owner with a lending company that is charging excessive rates and will not give credit for an early payoff.
If a business owner does not have the time, or the expertise necessary to investigate their alternative financing company it would be wise to ask their CPA or attorney to examine the financing agreement. Many of these online lenders are notorious for not disclosing rates, fees, penalties, liens and term and other important covenants in their agreement. It’s important to never sign or agree to any document before it is completely understood.
Having a thorough understanding of the contract is important, but there are additional questions to ask before signing a financing agreement. What kind of customer service will there be after the contract is signed? Is a company representative available to explain the documents? How quickly will funds be sent? How is the loan repaid? Will there be automatic withdrawals from your checking account? Is there a grace period if your late on a payment? Knowing the answer to these questions will probably be enough information to remind you why these online lenders have such terrible reviews and convince you to look elsewhere for financing.
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