Are online lenders safe? MUST READ!

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Are online lenders safe? 

With a business loan, you can obtain capital to manage working capital costs, buy equipment and inventory, expand your operation, and everything in between. There are many online lenders that offer a variety of small business loans. These lenders allow you to go through the entire application and funding process online. While it is convenient to obtain a loan online rather than going to a bank, but you're probably wondering if it's safe to get a business loan online. Well this is the best and most safe way to getting a business loan that will help you grow your business, without risking your financial security.

Are Online Business Loans Safe?

There are countless online loans on the market. However, not all of them are created for the same purpose. While some loans are completely safe, others pose a serious risk to small business owners and should be avoided at all costs. If you come across an online business loan that gets your interest, it’s important to do your due diligence to make sure they’re reputable. Otherwise, you may fall victim to a scam, causing you to overpay for your loan or risk your business's security.

How to Detect Suspicious Online Business Loans

When you research online business loans, be sure to keep these red flags in mind. If you see a lender displaying any of these red flags, you should look elsewhere for a business loan.

1. Upfront Payments

If a business lender doesn’t have the funds they claim they have, they might ask you to pay an advance fee when you apply for a business loan or line of credit. This fee may range from a couple hundred to several thousands of dollars, depending on the "lender". If you pay the fee, the lender will probably take your money and disappear. Keep in mind that any real reputable lender won't ask you for money upfront, regardless of the type of loan you're applying for.

2. No Physical Address

Even though online business loan lenders don’t typically have brick-and-mortar locations, they should have a physical address. If you can’t find a physical address listed on their website, the lender might not be a legitimate financial provider. In addition to a physical address, look for other details on their website, like their phone number and email address. You can also search for their business name on Google, social media platforms, and check out their reviews.

3. Lender Contact

While legitimate lenders may advertise their loan, they’ll never send you a personal loan offer with specific terms. If you receive one via email or mail and you didn’t sign up for a mailing list or inquire about a loan offer, run the other direction. The reason for that, is because a real lender can't give a real offer until they have the necessary information to work with and structure an offer.

4. Guaranteed Approval

When a lender extends a business loan offer, they’re taking on some risk. That’s why reputable lenders do not guarantee loan approvals without reviewing your credit score, business sales, and other factors. Instead, they put your loan application through the underwriting process and carefully evaluate your credentials. If a lender states they’ll approve you before you submit your application and understand your creditworthiness, there’s a good chance they’re a scammer. In addition, if they advertise payday loans that lack a thorough application process, it's possible their loan options won't be as good as they seem.

 5. “Too Good to Be True” Loan Terms

If you don’t have a good credit score or haven’t been operational for a long time, it may be difficult to qualify for a loan with low interest and favorable terms. If you receive an unbelievable loan offer, despite this, don’t get too excited. The lender may be a scammer or there might be a catch, such as hidden fees or a high interest rate. 

That will tell you if the site that you're on is secure or not.

2. Positive Reviews

Take the time to read online reviews about the lender that you're considering. While a few negative reviews every once in a while is no big deal, many bad reviews should obviously be a deal breaker. A legitimate lender will have countless positive reviews that  will show that borrowers have had a great experience with them. Positive reviews can give you the confidence you need to move forward with the application process.

Grow Your Business By Applying with Safe Online Lenders

Online loans are fast, flexible, and convenient, making them a great option if you need funding for your business. As long as you find a lender that’s free of the red flags we discussed above, don’t hesitate to fill out an application.  Remember to read and understand your loan agreement, before you sign the contracts.