I get 10+ texts, emails and voice messages a day from people offering business funding. Frankly, I stopped counting, but the latest one I received is the reason I’m writing this blog post.
Unlike the predators who flood inboxes and mobile phones with these deceptive offers, I’m being open-book honest here. This is a full-on rant.
These offers are despicable because to a hard-working business owner who’s already been told “no” by a bank but needs working capital just to survive, an email or voicemail can feel like a lifeline.
Instead, that “solution” is a boat anchor that can cause the small business to fail.
Here’s the voicemail transcript, with entity name removed to protect the guilty:
Hi, this is Katie calling from the underwriting department at XXXXXXXXXXX. I’m following up on some business funding options we still have open for your company. After reviewing your file, you’ve been prequalified for an Express SBA loan up to $175,000 with rates starting at 4.9%. Please call me back at your earliest convenience. I’d hate for these offers and rates to expire or change before we chat. I look forward to speaking with you and I hope you have a blessed day.
Let me break down the stop-sign-red flags from Katie’s voicemail that triggered my rant:
The “fast cash” red flag.
The idea of “fast SBA cash” is an oxymoron. I happen to be an SBA loan expert, which most business owners are not, so I know that even SBA Express (the proper term) loans require traditional underwriting by a bank or financial institution, and that takes time. A lender still has to review financial statements, repayment ability, tax returns, cash flow and risk.
In a best-case scenario at break-neck speed, SBA financing can take around 30 days. For larger or more complex requests, it’s more like 90 days.
The “your company file” red flag.
They reviewed my file? They don’t have my file, because there isn’t one.
The “You’ve been prequalified” red flag.
To fin-tech mass marketers like this, if a business owner can fog a mirror she can be pre-qualified.
Besides, being “pre-qualified” doesn’t come close to actually being approved. It likely only means the business owner answered enough basic questions to become a sales lead.
The “big money at a low rate” red flag.
If you or I can find funding at 4.9%, we’ll want to borrow a heck of a lot more than $175k.
Right now, SBA Express rates allow the financial institution to charge WSJ prime rate + up to 6%. I wasn’t a math major, but that sum will exceed 4.9%.
The “time is running out” red flag.
Katie wants me to respond before rates expire. The rate she’s peddling hasn’t existed for years, since back when the Fed rate for banks was close to 0%.
The “blessed day” red flag.
Sure, Katie, I’ll try and feel blessed while you try to screw me over with Merchant Cash Advance rates more like 4.9% — per month. Which are drafted weekly out of my account.
Thanks for reading. Rant over.
Let me now shift to counsel and advice mode.
People like Katie and her “too good to be true” funding offers are usually not traditional loans at all, based on the normal understanding of amortized annual interest. AI-generated calls, texts and emails have made these deceptive offers seem legit.
They sound professional. They sound personal. They sound helpful.
But fast money can quickly become expensive money. More expensive than your business (or any business needing to borrow money) can afford.
Beware of strangers promising next-day funding. Instead, talk to someone like me with a strong track record and a realistic understanding of the business lending process.