As you know, it’s quite difficult to find a loan if you’re a small business owner. The loan process is so time-consuming, that small business borrowers spend over four full days on average just searching for a loan.
And what’s more deceiving, is that these lenders claim to be quick with competitive interest rates, but that’s typically not the case. But what about loan brokers? Aren’t they supposed to hold loan seekers’ hands and be trusted with finding them the best loan at the best rate?
While this is the goal of an honest loan broker, some might actually be out for themselves rather than the client, charging outrageous finder’s fees for higher profits. In Brayden McCarthy’s article on Forbes, a small business owner applied directly for a loan and was quoted an interest rate under 30%. However, they had also applied for the exact same loan through a broker, and were quoted an interest rate of 45%--that’s a 15% difference! And while it sounds unfair for the poor small business owner, it’s unfortunately perfectly legal.
To make matters worse, small business loans have fallen from half of all bank loans to roughly 30% in the past twenty years. Roughly half of loans originated at online small business lenders actually come from brokers--which is why interest rates can reach as high as 130%! While buying online typically is perceived as the more cost-effective option, the brokers’ involvement in online lending has proven otherwise.
And the worst part? These are your suppliers struggling to obtain a business loan and at risk of going out of business. What would you do if the long-tail of your supply chain all of a sudden stopped operating?
There are a couple ways you can help stop your suppliers from predatory lending. By investing in your supply chain and offering a dynamic discounting or enhanced discounting program, you’re giving your suppliers the cash they need to hire and grow. And because discounting rates typically aren’t even close to the 30% interest rate common in loans, everyone wins.
In fact, Fortune 500 companies everywhere are taking the SupplierPay pledge to pay their suppliers as soon as possible to save them from expensive lending options. And by doing so, they’re creating a win-win situation between them and their suppliers, strengthening their overall trade relationships and business outlook. Did I mention stronger supplier relationships has been shown to result in higher profitability?