The Wolves in Sheep’s Clothing Are Preparing to Take Over Your Business!!! And you may not even know it!!!
Over the past few years, numerous alternative lenders have emerged, seemingly out of nowhere, peddling unsecured business loans. Most of these products are targeted to small “Main Street” business owners who are still struggling to get financing for their businesses and have been turned away from banks and other traditional lenders.
While many experts and watchdogs in business financing sector have been quick to ridicule the hefty price tag attached to some of these products, we have a bigger bone to pick.
Unsecured Business Loans Are Sometimes Wolves in Sheep’s Clothing. These companies may offer several different types of unsecured financing, such as short-term working capital loans, business cash advances, and invoice factoring, but many of them share a common quality: none of these companies are really offering unsecured business loans.
Unsecured Business Loans are Nothing but a Marketing Trick
If you’ve done any research on alternative lenders, you’ve probably noticed that the vast majority of them put a lot of emphasis on their unsecured finance products. But, often this is only being done to make their products look more appealing.
The reality is that many alternative lenders, business cash advance providers in particular, must file a UCC-1. A UCC-1 is a lien against your business; it’s the legal right of a lender to sell a borrower’s collateral property in the event that the borrower fails to meet the obligations of the loan contract.
This means, if you are unable to repay your obligations, your alternative lender can seize your assets and either sell them or hold on to them until the outstanding debt has been settled.
There is nothing unsecured about any financing that requires a lien against your assets or your business!
Consider the online lender, OnDeck. Though it doesn’t actively promote unsecured business loans on its website, on its Frequently Asked Questions page, they get a bit ambiguous:
Is OnDeck a unsecured loan?
OnDeck loans are not secured by real property, specific or personal assets. They are backed by a personal guarantee and in some cases a lien on the assets of the business.
Because important details about the terms and conditions of your alternative financing may often be hidden deep within the fine print, before agreeing to any form of unsecured finance, you need to get a copy of the financing agreement and look for the words “lien” or “personal guarantee.”
Do You Know Where and How to Get Real Unsecured Financing?
Though business cash advances and other short-term financing products have their place in the alternative lending landscape, these kinds of products are best used as a temporary stepping stone to better, future financing.
Why lock yourself into an expensive financing package that is putting your business and personal assets at risk if you don’t have to?
Sometimes we recommend that clients take out a business cash advance, but these financing solutions are only a small part of our product mix, and their use is always tied to a long term plan to move the business to better and cheaper financing in the future.
We also have the ability to offer real unsecured business loans that do not have the UCC-1 filing and that come with no personal guarantee.
It’s often not necessary when business owners have demonstrated strong cash flow management and fulfill other criteria.
The benefits of these unsecured business loans are:
No personal guarantees
No prepayment penalty
No UCC filings (even on equipment leasing and factoring)
Financing up to 12 months
In short, be wary of lenders offering the unsecured business loans. Sometimes those innocent looking products are nothing more than wolves in sheep’s clothing….Image Credit
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