If you’re a small business owner in need of immediate funding, you may be curious about instant loans. Is it safe to apply for them? The answer depends on where you are obtaining them from. In this article, we’ll break down what instant loans are, and the best practices to use in shopping for them.
What are instant loans for business?
Instant loans for business are typically short-term loans that don’t require a credit check to apply for. It is important to understand that, despite what their name implies, they are NOT:
- The instant lending of funds as soon as they are requested by the borrower.
- The instant arrival of funds as soon as the borrower’s application is received.
An instant loan is received by a borrower once his or her application has been reviewed and accepted by the lender. The processing length varies, and can actually take days to receive the funds should the lender need more information from the borrower. That said, quicker isn’t always better, particularly with instant loans as they can be susceptible to fraud.
If you are going to apply for one, it’s imperative that you make sure you are obtaining it from a legal lender. Here are five practices you can implement to do that:
- Research lenders that offer instant loans for business.
Start by researching any lender that offers instant loans, especially if they approach you with offers. Search their name and the company they work for, any feedback online from previous borrowers, and whatever else you can find on their lending history.
Don’t be complacent if there is not much information about them online. Lack of information doesn’t indicate they are a legal source, but rather, the opposite. A legal lender should have an online presence that is easy to find.
- Check if their company details are registered with the business bureau.
Check if the company they work for is registered with the Better Business Bureau. Do they have a secure website? If so, does it include contact information – a business address, phone number and email address? If not, this is an early indication that you are likely dealing with a scammer.
If the contact information is clearly displayed, enter it into the bureau website to see if the company is registered. If they aren’t, do not work with them.
- Inquire about the lending company’s payment requirements.
Always ask the lending company if they require any payment in advance. If they do, that’s an immediate red flag that they are not legitimate.
A legitimate lender will disclose any lending fees to you upfront. They may deduct them from the loan amount, or in some cases, ask you to pay them after the loan has been received. They should never demand money from you before you’re able to borrow.
- Does the lender offer a guaranteed approval for a loan application?
Fraud lenders will try to make their loan offers as attractive to borrowers as possible, which may include guaranteeing instant approval of the loan application. They make it seem like borrowers can skip the paperwork and other requirements as a means to lure them to take out a loan. This is another automatic red flag.
A legitimate lender will never guarantee a loan before reviewing the loan application. They have to go through it thoroughly to verify whether the borrower can repay them on time.
- Do not disclose your personal information hastily.
Second, you should check if the loan company has a secure website. How do you do this? The site should have a padlock symbol on any pages that ask for personal information. It should also have a URL that starts with “https,” as opposed to “http.” The “s” actually stands for secure.
These security measures indicate that you are dealing with a legitimate business that cares about the protection or your private information. Alternatively, sites that do not take these measures either don’t care, or worse, are actively trying to steal your information. Never enter personal details into an unsecure website.
While these five tips are a good way to indicate any immediate red flags about a potential lending company, you can also source a lawyer to perform a more thorough background check and even communicate with lending companies on your behalf. This added security of course comes at an additional cost, so you would have to evaluate if the expense is worth it.