Searching for the right business loan broker can be similar to online dating.
You spend hours scrolling through different sites and various profiles, all in the hope of finding your “best match.” But, when it comes to finding a loan broker for your business, you’re not just risking heartache—you’re also putting your finances on the line.
In your quest for the perfect match, how can you make sure the company you eventually choose will put the interests of you and your business ahead of their own?
Just like a deceiving profile on Match.com, a broker that seems “too good to be true” probably is. So for the sake of your finances, we have identified five trademarks of bad news loan brokers. Keeping these trademarks in mind will help you avoid brokers that will “dine and ditch” you and your business.
5 signs of a bad news loan broker:
1. They don’t have location information.
It sounds simple, but the company you’re dealing with should have a searchable brick-and-mortar address and phone number.
Get the company’s number in the phonebook or online, and call it to make sure they are who they say they are. The more information you can find about their location online, the better.
The less? The more nervous you should be.
2. They are lacking a legitimate online presence.
While blind dates often lead to romantic evenings, not knowing the background of your broker is a potential nightmare. You wouldn’t hire someone to work for you without first seeing their resume, would you? The same reasoning should apply to finding a business loan broker.
Check with the Better Business Bureau to verify the legitimacy of the broker (and the lender they suggest you work with). Even simply plugging the name of the broker and the word “scam” into your search engine can bring up revealing results.
It’s best to try to find as many online reviews as you can, across a few different sites, to learn more about the broker. Keep in mind, of course, that some reviews can be fake, so check into how the site verifies these reviews. And no matter what, if you can’t find anything about the broker anywhere, you should run the other way.
3. They do not ask for your credit history.
Scams will usually “guarantee” you’ll receive a loan before they’ve even checked your credit. Look out for advertisements with promises like “no credit check” or “guaranteed,” as these words often indicate a scam.
Avoiding a credit check or references may seem like a dream come true, but no legitimate lender will give you a loan without at least performing a soft credit pull, giving them some assurance you’ll be able to pay the loan back.
4. They pressure you to act immediately.
The proposition of a “fast” or “quick and easy” loan can be exciting, but pressure to act fast should be a warning sign.
Don’t let your enthusiasm to get the ball rolling affect your judgment. Also, the faster you can get a loan, the higher-cost it will usually be. Lower-cost loans usually require more paperwork and underwriting time.
It’s easy to let your guard down, but you’ll be glad you waited if you take the time to weigh your options.
5. They request an upfront payment or fee.
One of the most obvious signs of a bad loan broker is a request for upfront payment.
Often, brokers will disguise this request as a premium, or a security deposit. Brokers should be making their money only after you successfully secure a loan, not charging to do the work of finding you a loan beforehand. If you’re being asked to send a fee before the loan comes through, there is no guarantee that the broker will hold up their end of the deal.
Separating the brokers who will wine, dine, and dump you from the ones who truly want you and your business to find “happily-ever-after” isn’t always easy.
But spotting any of these five signs should be an immediate red flag. In our book, the only thing worse than a broken heart is a bad news loan broker.