Whether most people realize it or not, banks are not a business owner’s friend. Rather, they can be an entrepreneur’s worst enemy. In many cases, banks won’t do business with an entrepreneur without that individual having perfect credit, years of experience in business, and more. Should an entrepreneur not have those elements, they may be rejected or forced to sign their house over to the bank as collateral.
If you have been applying for a bank loan, ask bankers these questions before you consider signing the dotted line. It may make you rethink your decision.
- Do I have to put any collateral up? Though it seems innocent, the practice of collateral can be a very dirty trick played by banks. Many business owners have lost their houses because banks ended up taking collateral once they couldn’t pay back the loans. Worse still, some evidence suggests that bankers knew they were offering a loan for a “dead business,” which means it’s basically legal theft. Choosing a cash advance is a much better, safer option.
- Is there a maximum or a minimum loan amount? This is a good way to find out if you’re going to be forced to borrow more or less than what you actually need. If this is the case, then you may want to look into alternative lending since it offers more flexible loan amounts.
- What happens if I can’t pay the bill one month? The most common answer that banks will give you is that they’ll eventually take collateral or report you to credit bureaus. Either way, this is not a good thing for you as a business owner. With cash advances and other funding forms, you don’t have to pay a cent if you don’t make money during that week or month. Needless to say, there are other forms of business funding out there that won’t give you the strain of a bank loan.
- Is there a penalty for paying early? Surprisingly, some banks actually do penalize you for paying off a loan early. This just doesn’t make sense for business owners who want to get over having to pay off a loan. Wouldn’t you want a form of lending that doesn’t punish you for doing the right thing?
- When would I get the money? A merchant advance takes about three days, max. A bank loan can take as much as three years to complete. That’s food for thought.
The bottom line is that you need to consider getting a merchant cash advance instead, if only because it tends to be a safer option. Want to learn more about business financing? Call CPS today.