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Getting extra cash is always a challenge for SMEs. Businesses that successfully receive financial backing from angel investors or VCs are few and far between. To ease cash flow, most companies will be seeking credit financing from banks.
With so many financial institutions out there in the market offering a myriad of business loan options, business owners are spoilt for choice. Yet, deciding which bank to go to is probably the easy part. The real challenge is to maneuver past the mountainous process that precedes a successful loan disbursement.
Just fill-up the necessary forms and submit, you say? Trust us, it’s more tedious and cumbersome than that. Why? Because, firstly, different banks have different requirements and lending criteria. There’s no one-size-fits-all.
Secondly, drawing up a good business proposal and making sustainable and realistic projections are time-consuming too. Add to that the to-and-fro correspondences between company and bank, it is no wonder many business owners find the process exasperating. So should business owners give up on applying for business loans? Of course not. There is a smart way to go about it: Outsource it to a reliable business loan broker.
A business loan broker, also known as an SME loan consultant, acts as a middleman between you and prospective funders. The broker’s role is not just to source for the best rates and deal for you, but also ensure that the loan application process is smooth till loan inception and disbursement.
The recent rapid growth of the online lending industry has made it easier than ever before for small business owners to get the funds they need to reach their business goals. However, that has also seen a jump in small business owners falling victim to a proliferation of fly-by-night business loan scams across the internet.
Loan scams continue to grow by about 50% compared to the same period last year. From January to March the number of cases rose to 421, from 281 compared to last year. Fake loan schemes where one of the common tactics – scammers got away with around $41.3 million between January and March this year.
At b.Smart, we are concerned that uninformed business owners are unable to protect themselves from unscrupulous fly-by-night online scammers whose sole objective is to fleece them of their money and data.
Hence, we have listed down six tell-tale signs of a dubious operator, in the hope that business owners will be able to spot these business loan scams and avoid being tangled by their traps.
No reputable brokers, licensed moneylenders, banks, and financial institutions will ever demand any upfront fees to process any loan applications. The moment such a request is made, business owners must walk away and never return.
Business loan applicants will never be asked to fork out their own money to pay any fees pertaining to their loan applications. All processing fees, if any, will be deducted from the loan disbursement. Anyone who asks applicants to do otherwise must be treated with suspicion.
Cold calling is not a common method used among credible small business lenders for connecting with new prospective borrowers. If business owners are contacted by someone from out of the blue offering a business loan even though they have never initiated the contact or expressed interest through online or offline means, consider that as the first clue that something might be amiss.
Business owners must keep in mind that licensed moneylenders are prohibited from advertising on social media. The only online presence allowed is on their very own website. Business owners must stay far away from any business loan provider advertising on social media.
Before proceeding with any loan application, business owners should visit the loan provider’s website to check if it has a legitimate office address. They should visit the registered office premises if necessary. Scammers are unlikely to have an office address and this is one sure way to find out if they are above board.
Goods and Services Tax (GST) is exempted from any types of business / personal loans. The moment the lender informs you that the loan has been approved and request for you to pay GST, this is a big red flag. Business owners must walk away from discussions immediately.
The interests of our clients are our utmost priority. By informing our clients on the possible pitfalls that they may face while sourcing for business loans, we are empowering them to make sound strategic decisions that benefit their businesses.
said Mr. Kenny Chan, Co-Founder of b.Smart.
Although legitimate and trustworthy online lenders have been immensely valuable to SMEs, owners will do well to stay alert and guard themselves against these unscrupulous self-proclaimed “business lenders” or “loan brokers” whose real goal is to scam their money and data before disappearing into the night.
Bottom line – The best way to prevent falling for a scam is to know what to look for when you apply. By keeping your safety, and the safety of your business, at the forefront of every loan application, you can stay one step ahead of any potential scammers. And even if you’ve become a victim, there are still ways you can fight back, even if you can’t recoup your losses.
