3 Red Flags of a Business Loan Scam

As a business owner, it's very important to ensure that your venture has adequate funds regularly so that you can meet daily expenses and not negatively impact your operations. If you ever run short of funds, a business loan will help you get the cash infusion you need, whenever, wherever. Numerous lenders across India will help you get an online business loan (also known as a personal loan for business) quickly and easily. All you need to do is ensure that you have a strong credit score and all the relevant documents handy (especially your business financials and IT returns). Most of you know what to look for and how to evaluate your business loan lender while doing your research. However, in this article, we'll tell you how to ascertain if a particular lender is legitimate or a fraud. Read on!

1.Asking for Money Upfront

It doesn't matter if your lender tells you that your business loan will be sanctioned in just two minutes or that you're very close to receiving the funds directly in your bank account. Suppose they require a sum of money upfront, in the way of a "credit check fee", "registration fee", or anything else, during your application. In that case, it's time to shut the door on their face and move on. No lender, financial institution, or even loan officer should ever ask you for cash upfront, whatever the reason may be. Legitimate business loan lenders charge a processing fee on loans, which is very common. Along with this, they may also charge a one-time fee to check your credit report, but that's it. These charges will either be incorporated into your loan EMIs that you have to repay or deducted from your loan amount.

2.Failing to Provide a Physical Address

Is this something that hasn't crossed your mind until now when you think of business loan lenders? It's surprising how we all assume that any legitimate lender is bound to have a physical address, but this isn't as trivial as you think. Every lender that you evaluate for suitability regarding your business loan should be able to provide you with a mailing address that you can search for online. You should be able to verify it on Google as well. Typically, when you search for any lender, you should first see their address, along with maps to their actual location. If they cannot give you one, be assured that your "lender" could be operating an online business loan scam from somewhere outside India.

3.Providing Cash Advances

Suppose you're the owner of a small business that has just started. In that case, it's understandable to worry about getting adequate financing on time. But no matter how urgently you need cash for your business, never fall for unscrupulous lenders offering "cash advances". It might be tempting to opt for them because you get the cash in your hand instantly. But always remember that these loans are a debt trap with ridiculously high interest rates and impossible loan terms (in terms of repayment tenures). So, the next time you come across an offer for "cash advances", don't even consider it and keep searching.

In Conclusion

Before you agree to apply for any business loan and sign your loan agreement, ensure that you understand the terms completely and are confident in your ability to honour your loan EMIs within the repayment period that you selected. Be certain you understand the true affordability of the loan, which means you need to consider the APR and processing fees and other charges associated with the loan. Never consider only the interest rate. You can easily calculate the annual percentage rate using calculators online.

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