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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 small business 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. If you’re working with a loan broker for bad credit, for example, you might find out in the end that individual didn’t have your best interest at heart.
Getting a loan with bad credit is notoriously hard, so you want to make sure you can really trust the person you are working with. You don’t want to waste your time and you don’t want to hurt your credit even more in the end (or end up in a more expensive loan than you deserve).
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 for bad credit that lacks a physical business address on its website. It could be a fly-by-night operation and you want to make sure there is definitely a way to find this person.
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. What’s the point of using a loan broker if you can’t get ahold of them?
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. The more research, the better.
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. That’s what is so tough about loan brokers for bad credit–their pitch is they can help you even if your credit is struggling, but they need to know what your credit score is to know what lenders you have a chance of qualifying for. Everyone has a different definition of bad credit.
5. No references. Look for testimonials from real customers in the company’s marketing materials and on the website. A loan broker for bad credit should also be happy to provide references you can call to see how satisfied former clients are with the service. Online review sites are also a great place to look for customer references.
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.
Legitimate loan brokers for bad credit 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.