The ammo you gave predatory lenders and brokers when you submitted your 3 months of business bank statements and simple application for funding.

All you need to do for funding is submit your last three months of business bank statements and your application... it's easy. However, once you have submitted your bank statements and information on your application you have given those who fund you valuable information. This information is most valuable when you begin to have trouble paying back your alternative loan or cash advance. In this article we provide an overview of what you can expect to happen from the information you give brokers and alternative lenders even before you are funded.

By Thomas Tramaglini, Chief Operations Officer

The Center for MCA Research

thomas@beaconclientsolutions.com 

About Thomas Tramaglini

It is simple and easy - the lender or the brokers tells you to send them 3 months of your business bank statements and an application....

The process is straightforward. Brokers or alternative lenders request three months of business bank statements and a signed application, granting them significant control over you and your business.

Bank statements are packed with information which alternative lenders will use once their client's default. Here are some ammo you give lenders and brokers the ability to use when you submit your application for funding.

Here is a list of what you give those when submitting your file for funding - each is explained below:

*You provide your sources of income which the lenders can get to if you default.

*You provide personal information such as your social security number.

*You tell tell the creditor what you spend money on.

*You tell the creditor how healthy your business is or is not.

*You give your banking information to the creditor and broker, meaning they can freeze those accounts.

*You provide the information of your processor(s).

*You provide your sources of income which the lenders can get to if you default.

When you provide business bank statements to alternative lenders, you reveal all your income sources to them. If you default, the lender can identify who pays you and quickly send UCC 406 letters to those payers, freezing your funds. Once your funds are frozen, you are compelled to accept the payment terms set by the lender (or risk losing all frozen funds), which is never favorable. Additionally, due to UCC regulations, most alternative lenders are not required to negotiate with you unless you are prepared to declare bankruptcy or take legal action against the lender, if you can afford it.

*You provide personal information such as your social security number.

When you give the alternative lender and broker your social security number you allow these lenders to run your credit and do background using engines such as Clear. The alternative lender knows when you try to access more money, apply elsewhere, your credit history, and more. Not to mention that most alternative lenders and brokers do nothing to protect your personal information on secure servers.

*You tell the creditor what you spend money on.

The creditor is aware of your spending habits. When negotiating a debt settlement, ensure your bank statements reflect only business expenses; otherwise, they could be used against you. For example, if you're spending on a car or a club membership, it might be leveraged to your disadvantage.

There's also a risk regarding which other accounts the business funds, such as personal or payroll accounts. When the UCC gets involved, almost everything is at risk, so it's important to be mindful of this.

*You tell the creditor how healthy your business is or is not.

When you provide bank statements, you show how much money you make and how much money you spend. Overall, this is a critical part of negotiating payment plans or mediating trouble paying. Further, as mentioned above, if you are spending money on things like Burger King and personal expenses it will be used against you.

*You give your banking information to the creditor.

Bank statements tell the alternative lender who you bank with, and with that comes your account information. When you default, alternative lenders will quickly cut you off from your bank accounts. Again, this will make your negotiation stance one of weakness and overall cause you to make a bad deal to get your bank account unfrozen. And while alternative lenders in most cases need a judgement to take your money from the bank, they will get a judgement and take your money if they can.

*You provide the information of your processor(s).

When you give alternative lenders your bank statements you provide them who your processors are. This can be another deadly step for the small business owner. The bank statements tell the alternative lender who processes your ACH or credit card payments. Once they have that information, it is only a matter of time until the alternative lender sends UCC 406 letters to the processors which freeze your funds. And unlike banks, the processor are ordered to send funds directly to collections without a judgement or even a lawsuit.

So what?

Overall, small business funders who collect bank statements think they are making sound decisions but in the end, they are just using an awful non-scientific way of gauging risk for default. Most of the time they lose. And when defaults happen, their saving grace is that they have three months of information that they can use to go after small business owners. We advise those are considering alternative funding or who have defaulted to consider the pros and cons of providing alternative lenders their bank statements.

The Team at Beacon Can Help.

The team at Beacon Client Solutions regularly works with clients who have been taken advantage of by MCA companies.  Specifically, those business owners who have been burned.

The solution is simple.  Get Help.  Now.

Dr. Thomas Tramaglini is the Managing Director and Negotiations Manager for Beacon Client Solutions, a company that supports small businesses on a host of fronts, especially MCA debt. Thomas has been a small business owner for many years, as well as held leadership positions in several organizations and companies. Thomas holds a B.A. in History, as well as Masters and Doctorate in Organizational Leadership from Rutgers, The State University of New Jersey.

Disclaimer: Beacon Client Solutions is not an accountancy, or a law firm. We are business consultants. While Beacon works with outstanding attorneys and accountants, we cannot and do not provide legal or tax advice. All of our work is connected to those who are legally certified to give such advice. Beacon does have a longstanding body of work in MCA resolution and understands what small business owners deal with, specific to MCA. Beacon Client Solutions serves clients in all 50 states, Puerto Rico, Mexico, and Canada.