When it comes to short-term alternative business loans, there can be numerous benefits – and growing numbers of businesses are choosing to get these small loans online. However, choosing the wrong short-term business loan type, broker or lender can represent major issues when misrepresented or ill-advised. And, as such, it’s imperative that you’re aware of some of the biggest traps, tricks and pitfalls most slick salesperson utilizes to make it sound convincing with an easy promise of future greater products; this should help you avoid making these same mistakes! So, don’t leave your loan choice to chance. Make the right choices for your business loans! Work with the right lender who has the right loans.
Top 10 Common Business Mistakes for Business Loans
Before you take out a short-term business loan, it’s imperative that you’re aware of these top ten mistakes people mistake. Indeed, short-term loans can offer a variety of different risk factors, and you should be aware of these to ensure you’re getting a fair and reliable deal with your own short-term business loan. So, without further ado, let’s consider the top ten pitfalls that business owners like you can fall into when taking out a short-term business loan. And, critically, we’ll take a look at how you can avoid making these mistakes for your own loan needs.
#1 Convenience can be expensive
First of all, it’s important to keep the mantra, “convenience can be expensive,” in your head while on the hunt for a good short-term business loan. Indeed, this is a common trap with most short-term business loans, and many brands find themselves taking out a short-term business loan offer that seems highly convenient.
But what would constitute a convenient business loan over one that requires more effort? There are a few ways by which a short-term business loan might seem like more hassle. For example, if a loan offer doesn’t come with a pack of paperwork to fill out first, this might seem like an easy and simple loan offer.
This can make these types of short-term business loans more attractive for many business owners. This is especially true for business owners who are already facing a lack of time. Indeed, if you’re already busy, you might be considering one of these simple and quick short-term business loans for practicality. After all, you might be arguing, the time saved in filling out the paperwork can be put back into running and improving the business! However, there is a major issue with this assumption, and that’s because you could be getting a poor deal. Indeed, short-term business loans with a lack of paperwork can commonly be less favorable than loan agreements that are a little more complicated to fill out.
So, what’s the best option in this case? If you’re offered a highly convenient short-term business loan with a not-excessive amount of paperwork, make sure you still check out other offers. After all, the time saving associated with convenience may not actually be valuable after all, if you’ve paid for it with unfavorable terms.
#2 Don’t fall for the first offer
Following on from our previous point, as part of choosing the best short-term business loan for your company, it’s vital you shop around. In other words, don’t just fall for the first offer that’s presented to you! It can be very tempting to take up a good offer as soon as it’s offered to you, and this is often seen from a convenience perspective too. However, it’s vital that you still shop around to make sure that your business is being offered a good rate and fair terms. There could still be a more suitable short-term business loan offer out there, so don’t rush to make a quick decision. You could find a better loan offer elsewhere just by shopping around and holding fire on accepting a loan offer.
#3 Don’t fall for the tricky salesmen
Some salesmen can be difficult to deal with. Sometimes, this might be because they pressurize or guilt-trip you into accepting a loan offer. Meanwhile, at other times, these difficult salesmen can be difficult in that they won’t accept anything other than a “yes.” Dealing with these salesmen can be a challenge and can represent a real worry for some business owners. Not only are they difficult, but trying to negotiate with them can be a major stress and this can have significant impacts on your happiness and morale.
So, it can often seem like an easier option to simply accept the terms offered by tricky salesmen simply to “get them off your back.” However, you should never have to put up with this, so don’t just say yes to a tricky or distressing salesman. Stand your ground, and if the salesman is being unpleasant, just put down the phone and look elsewhere for your loan opportunity. There’ll certainly be other businesses willing to offer a more favorable short-term business loan offer to you!
#4 Don’t fall for the old tricks
There are a lot of “old tricks” that lenders can use to get you to accept a loan that might not be the right one for you. Indeed, some short-term business loans can actually be incredibly unfair and charge an extortionate rate for services that really aren’t very good value. So, before you accept any offer for a short-term business loan, make sure that you’ve considered some of the old tricks used by salesmen in the marketing industry that can fool you into thinking you’re getting a good deal.
First of all, when considering the old tricks of the trade, it’s vital you’re aware of how salesmen can use clever wordplay to their advantage. The most skilled and crafty salesmen will often use very specific word choices and wordplay to trick their customers into thinking that the trade is a good one. However, don’t just take the salesman’s word for it. Take some time to consider the features of your chosen short-term business loan and check whether any of the salesman’s claims could have been a little overly generous.
Next, you should consider the legitimacy of pricing structures. Indeed, clever price changes and tweaks are one of the oldest tricks in the book, and these can make a short-term business loan seem like far better value for money than it actually is! First of all, make sure you always think carefully about the monthly repayments for your short-term business loan and how they’ve been priced; for example, if the repayments for a loan are (as an example) $98 per month, this can seem like far better value at first glance than a loan with repayments of $101 per month.
However, the difference between these two repayments is small, at just $3. As such, the former offer sounds substantially more affordable and can trick customers into thinking they’re getting a good deal – even though it’s really only a reduction of about 3% on the normal price.
Additionally, if you get an offer for money off your short-term business loan, make sure you consider the previous prices for the loan and the prices of other, similar loan models. Indeed, it’s not uncommon for a brand (acting very dishonestly) to put their price up, only so that they can discount the rates after. Indeed, discounted rates are a major form of enticement for many businesses, and it can be easy to fall into this money-off trap. Be careful working without any public knowledge of who this loan broker is. Unfortunately, these discounts may not always be quite as good as they seem.
#5 Money is not going to run out tomorrow
When looking for a short-term business loan, make sure you consider that loan opportunities aren’t going to run out! Indeed, if you leave it a day before you take a loan offer, you likely won’t miss out – and the chances are, if a brand is trying to pressurize you into completing a loan offer within such a short deadline, they may not be quite as honest and helpful as they’re trying to present themselves.
Therefore, when it comes to your business loan, take a breath and take your time to consider the different offers and opportunities available to you. Don’t just take the first offer, and don’t feel like you need to make a fast decision. Indeed, making the wrong decision for your short-term business loan can have severe, expensive consequences. Taking a little time to consider your options is, clearly, an important step to take and something that all business owners should consider before taking out a short-term loan for their brand.
#6 Be aware of those who charge money upfront
Have you been offered a short-term business loan that seems like an excellent opportunity, but the team wants payment upfront for the loan? If so, then you should be very aware of the potential for these to be a scam. Indeed, scam loan offers are becoming increasingly common, and legitimate lenders will (almost certainly) not ask for payments upfront for their short-term business loan.
After all, the whole point behind a short-term business loan is that you need the financing; so, from a business perspective, it makes no sense to pay to access a loan. This is something that most legitimate short-term business lenders will also be aware of. So, any lenders requesting payment upfront could quite likely be a scam. In such a case, after making the payment, you will quite likely find that no loan money ends up in your business account at all.
#7 Make sure you can afford the contract
Before taking out any business loans, regardless of whether it’s a short-term business loan or a long-term option, you should ensure that you can meet the monthly repayments. Indeed, failing to keep up with the repayments on your short-term business loan can have massive consequences, and this can lead to a “slippery slope” of taking out new business loans to afford to pay the old ones.
Don’t make this mistake and put the financial viability of your business at risk. Before taking out any loan, complete a full financial analysis and profits forecast to make sure your firm will likely be able to keep up with the repayments. This may prove pivotal in ensuring your firm doesn’t get trapped by unfeasible repayment terms.
#8 Check the terms and conditions
This should go without saying, but we should highlight that reading the terms and conditions in full are absolutely imperative for your short-term business loan. Indeed, many people skim over loan agreements and terms these days – but this could leave you legally bound to a contract that isn’t ideal. So, don’t put your brand at risk; dedicate some time to read through the terms and conditions and ensure you’ve fully understood them before signing any short-term business loan agreements.
#9 Don’t rely solely on financing
When it comes to getting money in the short term, you shouldn’t rely solely on financing. Indeed, if your business is only able to keep running for the foreseeable future with loans and borrowing, you may want to consider “cutting your losses.” Indeed, relying solely on financing is an easy mistake to make, but it can leave your brand in dire straits.
#10 Remember to consider other options too!
A final mistake that business owners make is forgetting to consider other financing options, such as fundraising events, selling off business shares and unnecessary stock, and the like. Indeed, short-term business loans can be important in some circumstances, but before taking one out, you should consider whether it’s really necessary. After all, if you can afford to continue operating your brand without taking out a loan, you may end up in a better financial position without the burden of monthly repayments to be met.
So, what do you think about our list of the top ten pitfalls people often make for their short-term business loans? Did we raise important points? Have you experienced any of these pitfalls during your own search for a short-term loan offer? Do you think we’ve missed out on any important traps and mistakes? Let us know, and remember – there’s no pressure to take out an alternative short-term business loan immediately, so take a breath and choose the right offer that will work best for your business. If you do choose to access working capital for your business, do your homework, don’t work with fly-by-night companies, don’t work with an unlicensed broker,s and don’t work with anyone who claims they have a better term after this one, it’s not always true. Here are some terms that you need to understand so you know what you’re signing into – Financing Terms for Business Owners.
For further inquiry into access to working capital for your business, please contact Liberty Capital Group. For over 15 years, Liberty Capital has helped thousands of small businesses get out of debt trap and put them into more reasonable and affordable terms that’s suitable to their current financial situation. We have options for all types of credit and profiles which is what makes a unique company offer from working capital, equipment loans, short-term loans, SBA loans, and invoice factoring, we have them under one roof.