The Risk of Applying with an Alternative Lender
As a journalistic endeavor, I applied for an alternative online loan. It was a big mistake.
A few months ago, I was sitting up late one night and thinking about what to write a column about. I decided to try applying for an online business loan just to see what the experience would be like. I still regret this decision.
I started with some of the larger, well-known companies and was rejected three times in a row. The reason given for the declinations is somewhat amusing: they all thought I was in their industry, which is a restricted one. They were unable to distinguish between a merchant cash advance broker, which MultiFunding definitely is not, and an SBA loan advisory or brokerage, which it is. Perhaps these companies have insight into their own industry that makes them hesitant to lend to it.
When I start down a path, I usually don’t give up. And that’s how I managed to make the mistake of going one step further. I applied to a company that I had never heard of before, but that had a slick interface and strong Google reviews. I also submitted three months of my bank statements through a secure portal. And that is when the chaos began.
The only thing I can make sense of is that this lender sold my lead and forwarded my bank statements to what seems to be a couple of hundred lenders. Ever since, I have received nonstop texts and phone calls with financing offers. To make matters worse, my kid and wife are on the same phone plan that I am, and they are constantly being harassed as well. We can’t unsubscribe and report spam fast enough. The inquiries keep coming.
To add insult to injury, one of the “lenders” that got my bank statements quickly withdrew money from my bank account, forcing us to adopt the Positive Pay system and change all of our procedures. Fortunately, we caught this in time, so we didn’t lose any money. But we certainly lost time.
My experience is a tiny example of a much bigger problem. I imagine that thousands of businesses unintentionally fall into this trap every day. The problem begins on Google when owners search for a small business loan and receive a barrage of appealing offers. The problem compounds if the owners take a loan or advance and the lenders try to hook them with upsells and offers of additional cash when the alternative lender suspects that the business needs more cash.
I do not anticipate any new regulations or rules around alternative lending in the current political environment. Therefore, it is more crucial than ever for us to educate small businesses about the importance of responsible borrowing. Remember, if it seems too good to be true, it probably is.
