I have a little warning for borrowers and finance brokers. You’ve probably seen some short term business lenders offering low rates of 1 and 2 % per month, with the word “from” next to the rate. The reality often ends up being a case where the real interest rate is a lot higher, or the approval letter is riddled with fee’s and charges, making it not all that cheap after all.
But if that’s not deceptive enough, we have noticed that the latest trick from these lenders is they no longer capitalise interest for the term of the short term business loan. Capitalised Interest or Prepaid interest is simply where the lender builds the interest into the loan, but it is all paid back at the end of the short loan term, along with the principal. It’s a must for short term business loans.
So back to these tricky lenders. They basically expect borrowers to be able to pay the interest to them each month. Of course, if you can’t pay the first months interest, what happens??? You’re in default and they apply their hefty default rate along with other charges. The other little trick that we see played on unsuspecting borrowers and brokers is rigid fixed loan terms.
For example… if a borrower needs a short term business loan for 3 months, and their exit strategy runs late and they need more time, these lenders will either put the borrower straight into default, or they insist that the loan is rewritten, which means a heap more upfront costs for the poor borrower.
At Homesec Business Finance, we see all this as entrapment, and this is why we will always capitalise the interest on all HomeSec short term business loans for the term the borrower has requested. And, if the borrower needs more time when the loan is close to expiry, we will accommodate that too, and with no fees and charges. So, its Borrower Beware, and Broker Beware. It can be a bit like flying with a budget airline or a premium airline. The budget airline looks great, until you re 1kg over your very ungenerous luggage limit, or you are 1 minute late in checking in. Whereas the premium service airline is completely flexible, and isn’t trying to make up for a heavily discounted fare by trapping unsuspecting passengers with tricky luggage restrictions, and having no option to change flights meaning you forfeit your fare if you can’t make your original flight.
So if you’re a borrower and you don’t like being tricked, stick with the lender you can trust, and that’s HomeSec Business Finance. If you’re a broker, always remember that the cheapest interest rate isn’t always the best deal for your client. Plus if you take a client to one of these tricky and unscrupulous lenders, who do you think your client will blame for taking them there??? Play it safe and get the honesty, service and respect you deserve. All of which you’ll only find with us.