See How Much You Qualify For
Qualifications: In business for at least 9 months with at least $120K in sales over the past 9-12 months
Deceptive lending practices abound, especially when you’re on the market for a business loan with less-than-perfect credit. Massive fees combined with inflexible terms and pre-payment penalties could be the end of your retail business’ success when loans are supposed to help you create wealth. Plus, with many retailers still feeling the effects of COVID-19, it’s crucial for business owners to stay vigilant and avoid predatory lenders who may be looking to capitalize on the high demand for business loans.
But, how do you define predatory lending? The FDIC describes it as “the imposing of unfair and abusive loan terms on borrowers.” Unfair and abusive terms are geared toward making you, the business owner, pay more in fees and interest, rather than setting you up for success to repay the loan in good time.
The worst part is that some lenders are skilled at these deceptive practices and try to hide their predatory terms behind the tempting promise of instant cash. Paired with many businesses struggling to obtain PPP funding or loans from other lending partners to stay afloat, this makes for an exceptional market for predatory lenders. Take the time to learn about the defining traits of a predatory loan so you can protect yourself and your retail business when shopping for the right funding solution.
1. Look out for vague terms & pricing
Any loan terms should have the terms of repayment, interest, and any other fees laid out clearly on the very first page. If you have to go digging into the fine print to find the actual terms of your loan, that’s a red flag. Interest should be listed as APR or a similarly easy-to-calculate format, so there are no questions about what exactly you’re paying.
Along those lines, if you have questions about your loan terms, there should be an associate available to answer those questions before you sign the terms and make it official. Don’t sign a loan agreement if you aren’t 100 percent sure what your financial obligations are.
Find a lending partner who offers a personalized, one-on-one experience for your retail business. It’s ideal when you are a real person/company to your lender, not just a number in a list.
2. Be Cautious of False Promotions
Beware of promotions that sound too good to be true, especially online. As more people opt for the convenience of virtual communication, it’s not uncommon for predatory lenders to take to social media to promote bogus offers.
Steer clear of false promotions and be sure you’re looking into the fine details of the loan before getting too deep into discussions with the lender. Oftentimes, deceptive ads sound better than they are in efforts to get you in the door with a predatory lender. Plus, these types of promotions are also avenues for phishing scams or deceptive ways to get personal information out of you.
While you should certainly consider several loan options for your retail business before making your final decision, be aware of exactly what each promotion offers and avoid giving out your personal information. Otherwise, it can be difficult to spot a predatory lender until it’s too late.
3. Avoid Overly-Aggressive Brokers
Stay away from brokers who pressure you into signing a loan agreement on the spot. You should always take the loan terms into consideration before signing, making sure that you read the fine print and understand your repayment obligations.
Plus, brokers who are quick to press you for a signature should be looked at with a closer eye during the post-COVID market. During the height of the pandemic, many lenders tightened their restrictions for loans in efforts to survive the pandemic themselves. A lender who fails to recognize the care that should be taken with business lending during these times could be a red flag.
If a broker wants you to sign without answering your questions about the fees and terms involved, then there could be terms involved that would turn you off from signing the agreement. Your broker should want to help your retail business succeed, not burden it with unrealistic financial obligations.
4. Understand Your Payday Loan Terms
Some business lenders offer short-term loans that demand repayment within 7, 14, or 30 days – in other words, the length of time of a pay period. A business lender who offers payday terms should be closely scrutinized.
These lenders know that you’re borrowing because you have a cash flow problem, which is unlikely to resolve itself within 7 to 30 days. As such, they’re banking on you defaulting on the loan and being on the hook for late or nonpayment fees.
There are legal protections against payday-type loans in some states, but these lenders aren’t always easy to spot. That means that when you’re seeking out funding sources for your retail business, you need to be even more vigilant to help protect yourself from the possible harms of payday loans.
Recognize Good vs. Bad Lending Practices
A good lending partner has a stellar reputation, a solid history of lending to satisfied small businesses, and is up-front about all of its terms and conditions. Its brokers and customer service representatives are interested in helping your business succeed, not burdening it until it fails.
Above all, it’s vital to know the reputation of your lending partner before you commit to any debt. Know that they are easy to work with, cooperative, and have no predatory tendencies that could lead your business into trouble. Mulligan Funding has a great reputation among our clients, with an A+ rating by the Better Business Bureau and numerous positive user reviews.
Call Mulligan Funding at 855-326-3564 to discuss your financing options today!
The information shared is intended to be used for informational purposes only and you should independently research and verify.
Note: Prior to January 23, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.