COVID-19 is an ongoing challenge facing businesses, but entrepreneurs are finding ways to adapt. Some brick-and-mortar businesses are reducing foot traffic, or moving operations completely to online platforms. Others are taking extra precautions to keep customers and employees safe. Throughout all of this, businesses still need financing, but some predatory lending practices have come to the forefront. How can businesses avoid predatory lenders during a pandemic and get the financing they need?
1. Compare lenders before applying for financing
Many lenders seem to offer similar financing programs, but there are often details that get overlooked. Interest rates, origination fees, loan amounts, and more can mean the difference between legitimate and predatory lending practices. Read reviews from other borrowers and talk to the lenders directly. Since you are looking for financing for your business, you are in control, and you should screen lenders in much the same way you would choose a doctor or a new employee.
2. Alternative financing is not always the best fit
Many businesses do not want to deal with traditional lenders because banks have been tightening their requirements, and businesses do not want to take on extra debt. There are lots of alternative lenders out there offering options for working capital, such as merchant cash advances. Merchant cash advances may seem like a good alternative to traditional loans, because they offer an injection of working capital without debt, and they have flexible payments instead of rigid installments schedules. However, merchant cash advances have hidden fees and extremely high interest, because no collateral is involved. Additionally, the balance, fees, and interest make it very difficult to repay the balance before the terms are up, leaving businesses with huge balloon payments. Many fly-by-night predatory lenders emerge and offer alternatives when the market is tight.
3. Try to finance your business from within
No one knows what curve balls will be thrown our way in the near future, so when it comes to financing your business, the advice from the experts is, “Keep it simple, fast, and safe.” Instead of taking on unnecessary debt from loans or dealing with potentially predatory business lending practices from cash advances, entrepreneurs are using factoring services. Factoring has been around for almost as long as businesses have been issuing invoices with staggered payment schedules. At New Century Financial, we offer fast factoring services to turn invoices into cash and made capital available to businesses within 24 hours. Factoring is a debt-free solution, and our services are transparent, with no hidden fees and no ongoing charges. We put you in control, so you can choose which invoices or parts of invoices get factored, so you can quickly build up capital to sustain and grow your operations. Contact New Century Financial today to get the financing your business needs.