While financing options for small businesses have increased over the years, the bad news is that many of these lenders are unregulated and engage in unfair and abusive lending practices, known as predatory lending, that can ruin your business.
This list of the top five warning signs for predatory lenders can help you avoid predatory lenders in the future, or determine if you’re dealing with a predatory lender now – and if you think you are, contact Excelsior Growth Fund (EGF) for options that can help.
You may be dealing with a predatory lender if:
1. You’re pressured into quick decisions
Unscrupulous brokers and lenders often use aggressive tactics to force borrowers into quick decisions before they fully understand their options.
2. You can’t compare loans because you're not given the terms and pricing in writing
If a lender doesn’t proactively present you with the annual percentage rate (APR), or loan fees aren’t clearly stated in the loan materials, it could be a warning sign.
3. The repayment terms are aggressive
Reputable small-business lenders offer repayment terms that support planning and growth, such as fixed monthly payments. Aggressive repayment requirements, such as daily or weekly payments, often indicate predatory lending.
4. There are obstacles to paying off the loan
Loan payoff requirements or fees should always be stated upfront. If you have trouble getting information about the payoff amount owed or are charged extra fees, you may be dealing with a predatory lender.
5. You’re trapped in a debt cycle
You may be dealing with a predatory lender if you were made a loan that your business can’t realistically pay off through its cash flow, or your lender doesn’t respond to your concerns regarding your ability to repay.
The Borrower’s Bill of Rights was created by the Responsible Business Lending Coalition to encourage lenders to commit to fair-lending practices and to educate small-business borrowers. The trick is that committing to the Borrower’s Bill of Rights is optional for lenders and, since not all lenders do it, even seasoned small-business owners can fall prey to bad loans when financial difficulties arise. As a responsible lender and signer of the Borrower’s Bill of Rights, EGF proactively works to protect you and your business from predatory lending.
How Excelsior Growth Fund can help
Learn about how business owner Maria Cruz fell into the predatory-lending trap – and then turned her business around in this Excelsior Growth Fund success story. And if you may be dealing with a predatory lender, contact EGF today to learn how we can help: A SmartLoan™ from EGF, for example, quickly helps qualified borrowers significantly lower debt payments and improve cash-flow position.
About Excelsior Growth Fund
Excelsior Growth Fund (EGF) helps businesses in New Jersey, New York and Pennsylvania grow by providing streamlined access to business loans and advisory services. EGF’s signature product, the EGF SmartLoan™, provides up to $100,000 in fast, transparent, and affordable financing through a secure online platform. Larger loans up to $500,000 are also available. EGF is a nonprofit organization and is certified by U.S. Department of Treasury as a Community Development Financial Institution (CDFI). Learn more atwww.excelsiorgrowthfund.org.