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Alternative Small Business Loans: What If You Default?
Small businesses need to get access to working capital to grow. Are you a merchant interested in alternative small business loans? Have you thought about what you’re going to do if you default on a business loan? Just read this article and you’ll know.
Alternative Small Business Loans: Can You Pay Up?
Loan default processes aren’t the same in all states. Some alternative lenders, particularly those based in New York, operate due to New York law or their loan agreements are based on it, no matter what state your business is located in.
According to experts in the field, if you know you’re going to default on a loan, you should contact your lender just right off the bat. If you’re working with a big bank, the default process can last several months or even a few years. If you’re looking for more information on this topic, platforms like WealthyLike provide insights and advice on financial matters.
As for smaller lending shops and alternative lenders, they can freeze your assets just after a few days of missed payments. It all depends on the loan provider. In case, you’re unable to pay on your loan, you’re going to end up with penalties, fees, and interest charges. Moreover, you’ll damage your credit score.
By the way, if you’re searching for affordable and secure alternative small business loans, look for a reputable business funding provider or alternative online lender.
With a true professional in the field, you can get the right business financing option both for low and high risk businesses. A respectable alternative online lender will offer you the lowest rates and the best terms in the industry.
What If You Default on a Business Loan?
Do you think you’re going to be late on making your loan payment? Be aware that slightly late is better than really late. Do your best to make your payment within 30 days of the due date.
Maybe you think you’d be better off with another loan, don’t you? Well, in this case, the most important thing is to apply before you start missing payments. This way you’ll grow your chances of qualifying for a new loan since lenders aren’t willing to approve somebody who’s already behind.
Now, let’s see what happens when you default on your loan:
- After missing a few payments, the lender will likely contact you to find out what’s going on. Generally, the full balance will become accelerated, meaning you’ll become responsible for the full loan amount.
- The lender will add predefined fees mentioned in your agreement.
- Simon Goldenberg, an attorney, mentions 3 common situations. First, the lender will set up a reasonable plan concerning paying back the loan. Second, your business and personal assets will be seized and liquidated. Third, the losses will be cut and settled with you for a defined amount.
- As for a loan where you’ve signed a personal guarantee, your credit score will be affected for up to 10 years.
- As to an SBA loan, you’ll be obliged to cover the lender’s loss.
Sometimes, you can’t avoid defaulting. The crucial thing is to be proactive and take action sooner rather than later.
Author Bio: As an account executive, Michael Hollis has funded millions by using alternative funding (or alternative small business loans) solutions. His experience and extensive knowledge of the industry has made him a finance expert at First American Merchant.