The Better Business Bureau offers advice for small business owners and entrepreneurs.
By: Kelly Trevino
Are you a new entrepreneur looking for a last-minute loan? Perhaps your business just needs a little extra money for a few months, or maybe you are a small business owner and a loan is just what you need to get your business up and running. If so, Better Business Bureau (BBB) serving Central, Coastal, Southwest Texas and the Permian Basin advises you to beware of loan scams.
Some lenders and investors target new entrepreneurs and desperate consumers in need of immediate financial help. According to the U.S. Small Business Administration, it is easy to miss a scam when you are busy trying to get your business financed. The Small Business Association warns prospective business owners of “fake investors,” who are often located overseas and require a steep fee in return for quick approval.
Payday lenders charge high interest rates, set unaffordable payment terms and use high-pressure collection tactics that can make paying off loans nearly impossible. Advance-fee lenders charge an upfront fee and will “guarantee” you a loan despite your credit history. Also, chances are, you won’t get your money back. Real lenders, like banks or credit unions, check your credit history – even if your credit history is good.
In 2014, BBB received more than 6,700 complaints nationwide regarding loans, loan servicing and small business loans. Most consumer complaints reported issues with contracts, billing or collection and sales.
If you are looking to take out a loan, BBB advises you to watch out for these red flags:
» The lender’s track record is poor. Consumers should review the BBB Business Review for any business before a transaction. A history of unanswered complaints, advertising issues or government action will let consumers know the company should be avoided.
» The lender requires an upfront fee. Legitimate financial lenders do not charge up-front fees to process a loan application. Beware of consultants, brokers and loans that require a fee up front and collect your money as a step toward getting investment.
» The lender uses high-pressure sales tactics. Advance-fee loans can carry extremely high-interest rates and have detailed information in the contract. Consumers should never feel forced to make a decision on the spot, and they should take time to get everything in writing before agreeing to the terms of the loan.
» The lender has little contact information. Beware of any business that only has an online presence and no physical address, and of any business with no contact information beyond an email address or phone number.
To find a trustworthy loan business or service, visit BBB’s Accredited Business Directory at check.bbb.org. For more important business advice, visit our website at www.bbb.org/central-texas under the “For Businesses” section, or our independent blog, www.watchyourbuck.com.
Kelly Trevino is the regional director for the Corpus Christi office of Better Business Bureau serving Central, Coastal, Southwest Texas and the Permian Basin. She is available for media interviews and speaking engagements. You can reach her at 361-882-6422 or firstname.lastname@example.org.