Establishing a new business always requires a large amount of money. Therefore, if you are an entrepreneur looking forward to starting a new business, you would have to scrutinize various financing options to fund your startup. Loans from banks or other financial institutions can be of great financial support for your startup. However, it is advisable to review the financial institution carefully before availing a business loan from it. This can be extremely helpful in avoiding any inconvenience in the later stages. Below are a few warning signs that can help spot a business loan from an unauthorized and fraudulent lender:
Lack of transparency
One of the most common problems often cited while availing a business loan is the lack of transparency. Financial experts always recommend avoiding lenders who do not offer transparency.
No online presence of the lender
Make sure that the lending institution you are opting for has an online presence and is easily accessable. Also, do not forget to go through the customer reviews of your potential lender before availing a business loan with it. This will provide you a clear idea regarding whether or not to avail a business loan from that lender.
The lender is aggressive
If a lender pushes you for availing a business loan by providing offers that sound too good to be true, it should be considered as a warning sign. You should refrain from availing a business loan with a lender who tries to upsell you a bigger loan than you require.
The lender uses a generic email addresses
If the lender is emailing you the business loan details from a Gmail, Hotmail, Yahoo or other generic email accounts, then it should be considered as a red flag. You must make sure that the lenders offering you credit products make use of an official business email address.
The lender guarantees that your business loan will be approved
Before approving your business loan applications, financial institutions make a thorough check of your profile which includes, your creditworthiness, repayment capacity, monthly income, etc. Therefore, if a lender guarantees the approval of your business loan without asking for any relevant information and checking your business loan application, you must avoid availing a business loan from that lender.
By identifying all these fraudulent business loans practices, you can save yourself from falling into their traps. While availing a business loan, you should not only review the authenticity of your potential lender but also read the terms and conditions of the business loan agreement carefully before signing it. Also, make sure to check your business loan eligibility with the help of a business loan eligibility calculator before applying for a business loan. This will reduce the rejection chances of your business loan.
Some of the major aspects that you should consider while availing a business loan are mentioned below:
- Makes sure that the business loan you avail has a competitive interest rate. Lower the interest rate, lower will be the overall cost of borrowing in the long run. You should be extra cautious while availing a working capital loan since these loans are short term loans intended to fulfill the immediate business needs. This makes a working capital loan appealing for a short term, the interest rate associated with them is comparatively higher. This can take a toll on the finances of the business in the later stage.
- As loan repayments consume the company’s cash, more loans need to be taken. This cycle can be hard to break. Therefore it is always advisable to borrow the loan amount after evaluating the repayment capacity. While availing a business loan, you should calculate your EMIs with the help of an online business loan calculator. This can help you make timely repayment of your business loan.
Choosing the right small business loan can play a crucial role in deciding the fortune of your new venture.Lastly, do not forget to read the terms and conditions of the loan agreement carefully before availing it.
