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7 Warning Signs You’re Working With a Bad Online Broker

Sorting through commercial loan rates for your small business can be a challenging process. Where should you apply? What type of loan is best? For busy small business owners, using a commercial loan broker can be a smart way to save time, learn about all your options and obtain the perfect small business loan.

I say “can” because, unfortunately, not all business loan brokers are legitimate. How can you spot the bad seeds? Here are 7 warning signs to watch out for:

1. No physical address on the broker website. Never do business with a loan broker that lacks a physical business address on its website. It could be a fly-by-night operation.

2. No toll-free phone number to call for help. Good loan brokers will have multiple ways you can contact them and get help from a live person. If there’s no toll-free phone number or if you only ever get a recording, be wary.

3. No track record. Good business loan brokers have lots of connections and industry knowledge gained from years of experience. If a loan broker website indicates a brand-new business, do some digging on the history of the business owners behind it. Don’t work with them unless you find that they have substantial industry experience.

4. No interest in your credit history. Is the loan broker site splashed with messages like “Get a loan—guaranteed,” or “Bad credit is no problem”? Watch out: This often indicates either an outright scam or a broker who will find loans with exorbitantly high interest rates. Legitimate loan brokers will carefully assess your credit history to find the best loan for you—they won’t ignore it or sweep it under the rug.

5. No references. Look for testimonials from real customers in the company’s marketing materials and on the website. A loan broker should also be happy to provide references you can call to see how satisfied former clients are with the service.

6. No disclosure about fees. In general, legitimate loan brokers won’t charge borrowers a fee. They don’t need to, because the lender pays the broker a fee when the loan is funded. If a broker that you are sure is legitimate does ask for a small fee, get a guarantee in writing that the fee will be refunded if you can’t get a loan, or applied to any fees the lender charges if you do get a loan.

7. No privacy. Always find out the loan broker’s privacy policy and make sure your business and personal data will not be sold to third parties. If a company won’t disclose its privacy policies, beware—you could get bombarded with sales calls, email spam and junk mail after doing business with them.

Legitimate loan brokers will be registered in the states where they do business. In addition to verifying registration, check with your state consumer affairs office, state and county district attorney’s office, chamber of commerce and Better Business Bureau to see if there are any complaints against the loan broker. You should also do an Internet search, ask your colleagues and other businesspeople for their opinions, and use social media to check up on the company’s reputation.

By doing your homework ahead of time, you can ensure your experience with a business loan broker is a positive one.


Rieva Lesonsky

Rieva Lesonsky

Contributor at Fundera
Rieva Lesonsky is a small business contributor for Fundera and CEO of GrowBiz Media, a media company. She has spent 30+ years covering, consulting and speaking to small businesses owners and entrepreneurs.
Rieva Lesonsky