Definition of loans offered to business owners.

Borrowing money is often sold as a strategy to solve business problems, which is a big fat lie.

Many business loans I see now feed off the vulnerable. It's the god-dam most awful business practices I have seen in Australia – ever.

At your Business Angels, we call these "toe cutters".

At Your Business Angels, you need a strategy to solve business problems. You need a plan; in that plan, you may need to borrow money. Borrowing money is a tactic, not a strategy or solution.

Let me start this blog by apologising to Sonja Pfitz, one of the few brokers we will let near our clients. I am sure there are professionals like her with a strong ethical and moral compass.

I am sure there are others.

But there are a bunch of mongrels chasing down vulnerable business owners to sell loans that will gouge their cash flow, force them to sell assets and lie and lie about how the owner will get out of the loans.

They hide from what they're selling under a list or name the loans to make significant, short-term profit, gut and financially strip the business owner and move on.

A plague of financial locusts migrates over the SME landscape and devastates businesses, particularly those with looming tax debt and those still recovering from COVID. This swarm of financial deviants will land and, in a short time, will cashflow strip a vulnerable business and move on.

I received an email this morning from one of these deviants – its smicky with the usual pictures of young people with these tick black-rimmed glasses, and it promises to solve cash flow, debt, tax and other problems up front, but when you click through all it is offering is loans.

That's a kind of fraud, isn't it – it is just BS anyway.

And their loans – there is a list of loans, but when you click on any of them, there is no explanation, just the usual application form for all of them.

So, for the company that sent me this document, let me define the loans you have listed, and perhaps some will read this and keep the definition of loans that you offer.

UNSECURED LOAN – An unsecured loan may be, but we will get a personal guarantee from you and check to see if you have property. Then, when you sign the agreement because you are so desperate, we will gouge out your cashflow with daily, weekly or even payments based on your f-post machine, stripping at this so other planning, such as paying bills, will be difficult because along with an insane interest, we will haul back the principle. When you have just about paid it off and are financially exhausted, we will offer more, you will be desperate and take it, and we will keep milking you for everything until nothing is left.

SHORT TERM BUSINESS LOAN – Nothing like an oxymoron as far as our lending practices go. You will think this loan is short-term, but the way the interest is calculated and the way you struggle to pay us, it will become a long-term business loan, and with our penalty interest, we will suffocate you until we have everything.

BUSINESS BRIDGING FINANCE LOAN – This makes you think your problems can be solved quickly. We don't know exactly what this loan would be; it's named so that you can think a short-term solution is just waiting for you. Once we have our claws into you, it will be the same as the previous two loans, and as you struggle, we will pull you into our grip.

INTEREST ONLY BUSINESS LOAN Makes you think that repayment will be easy, just interest and principal. Never mind that the interest is high, and never mind that a lot of our products are interest prepaid, so you never get the capital you think you will get, and never mind that the capital payment is just a year away. You should sell your house now, and by the way, under the terms, we don't refund interest if the capital is paid out early.

SECURED BUSINESS LENDING We can craft something where we have a lean against your home and the assets you need to survive and run your business. If you struggle, you will keep struggling to pay our outrageous rates – because it is your home and livelihood.

COMMERCIAL LOANS – HEY, they are all commercial loans because the evil we are peddling would never get over any of the regulations that consumer loans must conform to. And why would we when business owners like you are desperate for funds, and we can gouge out and milk down what you have left?

ASSET BACK BUSINESS LOAN – Gosh, even though the application forms all look the same, we need to craft up a few more names on our website to look like there is a choice, but this is like the rest; we gouge you; we get an asset as well – thank you – and you fit into our cycle.

SHORT TERM CAVEAT LOAN – We will grab anything we can along the way. A caveat loan is where we can pretend that because of its nature, interest is high, but we will be shortly gone. You are desperate – you will buy that, won't you – and oh no, we won't be gone in the short term, and there is a good chance we will take the interest upfront.

CAVEAT LOANS FOR BUSINESS – Of course, it's for business; we wouldn't ever get near giving you a loan if it looked like a consumer loan. We will have our hooks in you, a personal guarantee, and now we will start stripping you out of cash flow.

And that folks are the loans in the market for Australian Businesses. It is a pity banks don't have credit managers who can assess a business and do loans with SMEs.

I have one client who and his wife signed a second mortgage. Once I started talking to them after they did this (and I would have stopped them if I knew they were going to take this loan), The loan is for $500k, interest paid in advance, fees taken and by the time the money came through it was only $380k, and with a year to front up with $500k, so their house is on the market.

I have another client – who has taken a caveat loan – now get this: it's a 6-month loan, the interest like the above is paid in advance, but the remaining capital is only paid to our client after three months of the age of the loan. So, they only have the money for three months and then must front with the full capital value of the loan, which isn't what they have in their hands after three months.

Not that I would ever recommend it. I was aware of the interest rate of a Bikie gang that a client dealt with. It was less than what many of these lenders with their BS websites with the professionals in thick-rimmed glasses are charging.

At Your Business Angels, we know you need a strategy to solve business problems. You need a plan and may need to borrow money in that plan. Borrowing money is a tactic, not a strategy or solution. We always have a different challenge – that we can get through because we are good at what we do when a business limps in with tax debt and some of these bloody loans.

For those who need the contact of a broker we know will work hard and do the right thing by your client and be honest - Sonja Pfitz <[email protected]>