Why Small Businesses Are Falling for Loan Sharks
You hardly sleep when you run a business. Even after you build your business, there are there is a constant need for financing. You have to pay for the equipment and furnishings. You may need to renovate your office space of production space. At some point, you may want to expand and build other businesses. All of this work takes money. Small business loans are necessary but difficult. Where you get your loan is also important. Non-traditional loans require little or no documentation, but the lower credit requirements come at a price.
It Is Hard Getting Small Business Loans
If anyone asks why so many business owners are turning to payday lenders, they all give the same excuse – it is hard finding small business loans. The banks are not willing to give their money to many business owners, even the ones with good credit. Payday lenders are more lax in their restrictions and give all entrepreneurs the chance to succeed in their industry.
Although those facts may be true, it does not change the fact that high-interest loans are risky. Finding a loan shark is even riskier for business owners than for individuals. You have to borrow thousands of dollars at one time and expect to pay back thousands more in interest. That is why businesses are more likely to suffer from getting into a bad deal from predatory lenders. Your business is tied to your livelihood, so your career and finances may never recover after dealing with a loan shark.
Here is another excuse from a payday loan borrower – there are no worries because the industry is regulated. It is true that all payday lenders are closely watched by the government, but the regulations are not strict in every state and every country. There are illegal operations that operate outside regulation, too. But beware. Loan sharks always try to trick their customers and use the lack of oversight to threaten and intimidate borrowers. As a smart consumer and an even smarter professional, protect yourself first.
Small Businesses Loans Leading To Bankruptcy
It has become all too common for small businesses to go bankrupt. Some of the bankrupt businesses are linked to high interest loans that have gotten out of control. Not being able to control debt is one of the biggest reasons that businesses lose profits and go under.
The payday lending industry may be fine for short term loan and smaller amount, but business loans should pursue business lines of credit to finance business expenses. In the real estate industry, you will find the same types of high-interest-rate mortgage companies. The bad credit auto lenders are the same way.
Small business loans come with terms and conditions that you must read. You can hire a lawyer to go over the fine detail with you, but make sure you understand every word before signing the contract. Know how much you can borrow, when to make repayments, how much interest gets added over time and if someone can cosign – just to name a few considerations.
Remember payday loans are legal, but their interest rate can be high. It is your responsibility to research the state’s laws on payday lending and find the lenders that are real and legitimate.
Payday lending is there to help individuals and businesses. Business owners will themselves in deep trouble with poor management. Make sure if your next small business loan comes from a non traditional loan source like a payday lender you know what you can repay safely.