Trusted Lending

Trust is a key component of any lending arrangement. The lender needs to have trust that the borrower will pay them back. The borrower needs to have trust that they are getting a fair deal that is in the best interest of their company; not a deal that only suits the lender.

However business owners can be desperate for money, and there are profiteer’s looking to capitalize on this desperation. The Wall Street Journal wrote and article about such a man by the name of Surinder Multani.. This loan broker charged steep fees to small businesses owners on the basis that he could secure a SBA loan for them. He did deliver on this promise, brokering almost fifty deals totaling $44.3 million dollars. However these loans were not of benefit to either the borrower or the lender as roughly half of the loans he brokered ended in default.

So how did he get the loans for his clients when businesses couldn’t do it on their own? He lied. He would fill out and submit the applications on his own, providing false information about the assets and capacity of the businesses. This got him an 11 year prison term, and could get the business owners, who may or may not have known about the fraudulent loan applications, in to legal trouble of their own.

Crooked loan brokers are a big problem for the SBA. Over the last six months loan brokers have been convicted for such practices on loans totaling roughly $60 million dollars. The small, working capital, Community Express loans have been particularly troublesome in this respect.

Moral of the story: know who you are dealing with. Failing to do this could have dire financial and legal consequences. Also, trust your bank. If you are turned down for a type of loan it is probably for good reason as demonstrated by the 50% default rate of Multani’s clients. Rather then trying new ways to get the same loan, consider alternative sources of financing. PO financing, Factoring, sale and leaseback are just a few of the alternative financing options that may be available to your business. Often times these alternate forms of financing will help a build business credit history that will provide a basis with which to qualify for more traditional loans in the future.