Business Credit and Covid Relief Scams – What You Need to Know
If you own a small business, you may find that you have occasional issues with your cash flow. One option is to open a line of credit for your business. There are several advantages to this, but you also have to keep a few things in mind. First, the United States Small Business Administration has a plethora of lending opportunities from extremely low rate loans to outright grants that you do not have to pay back. The only limit here is a small business persons resourcefulness.
Know the Difference Between Secured and Unsecured Credit Lines
One of the things to remember is that you should know that there are two types of credit lines: security and unsecured. A secured credit line is one that is secured by the assets your company has. If you default on the loan, the lender will take the assets. An unsecured line of credit doesn’t require any collateral.
Check Out the Fees
You also might want to look closely at the fees. Interest is a necessary part of loans, but there may be other fees associated with a line of credit. If you access your line of credit again and again, for instance, fees might go up. There also might be some maintenance fees you have to pay.
Think About Bank Drawdowns
If there are ever times of economic uncertainty, it’s possible that the lender might require a borrower to pay back a balance of the credit. You might think that this is not allowed, but if you signed on the dotted line, you have agreed to it. Things like this are found in the fine print agreement.
Realize Interest Rate Variability is Possible
Most interest rates on lines of credit are variable, and these are solely based on the prime lending rate. Keep in mind that if your interest rates go up, so will your payments. Make sure that you can pay that back if this is the case.
Consider Insuring Your Line of Credit
Also, you should consider insuring the line of credit. This helps to cover any payments if you get injured, become sick, or die.
Think About How to Get a Better Line of Credit
There are a number of lenders that offer lines of credit, so it’s important that you do research before you sign. You also may want to look at the borrowing limits the lender has and pay attention to the repayment terms.
Reach Out to the Small Business Administration
Finally, and especially during this pandemic, think about reaching out to the Small Business Administration for help. It can help you put a plan into place to help you get credit, just remember that this organization isn’t a direct lender. Instead, you can find programs like “Lender Match,” which looks at your business, and then matches you with lenders who may be able to best fit your needs.
Beware of Scams
During “uncertain” times bad guys come out of the woodwork praying upon confusion and desperation. And during a pandemic, scams proliferate. Any time the phone rings, and email comes in, or even a letter via USPS, be suspect. Don’t automatically trust, and make sure to do your research before you ever provide any sensitive information.
Cyber Security Insurance
Finally, even though funds might be tight, all small businesses need to consider cyber security insurance policies. If there is a data breach, and your clients information is at risk, it is going to cost a significant amount of money in legal bills, and cyber security insurance is designed to offset the damages.
ROBERT SICILIANO CSP, is a #1 Best Selling Amazon author, CEO of CreditParent.com, the architect of the CSI Protection certification; a Cyber Social and Identity and Personal Protection security awareness training program