When your business needs capital, fast cash can feel like the answer. But as Ami Kassar, founder of MultiFunding, recently warned, some shortcuts to funding can cut off better opportunities down the road.
Key Takeaways:
- Alternative lenders offer quick approvals—but often at steep long-term costs.
- Accepting high-interest financing can disqualify you from better loans like SBA-backed options.
- Small businesses have fewer protections in lending compared to consumers.
- Business owners should review all terms carefully and consult advisors before signing.
- Traditional lenders may be slower, but they often offer safer, more sustainable capital.
A Real Wake-Up Call for Small Businesses
In a revealing post featured on 21hats.com, Ami Kassar shared a story that should concern any business owner seeking funding. One of his clients, a strong SBA loan candidate, had recently accepted a fast loan from an alternative lender. That decision—made without full awareness of the consequences—nearly disqualified them from receiving a low-cost SBA loan.
Kassar didn’t mince words: “That loan almost ruined everything.”
Why Entrepreneurs Turn to Alternative Lenders
When traditional banks say no—or move too slowly—business owners often feel backed into a corner. That’s where alternative lenders shine:
- Fast online applications
- Approval within hours or days
- Minimal documentation
- No collateral required
These offers look great on the surface. But underneath? There’s often hidden cost and risk.
The Real Cost of Convenience
Alternative financing options like merchant cash advances (MCAs) and short-term loans often come with triple-digit APRs, aggressive repayment schedules, and limited transparency. And unlike personal loans, small business financing isn’t covered by federal consumer protection laws.
That means:
- No standardized disclosures
- No APR requirement
- No oversight by the Consumer Financial Protection Bureau (CFPB)
As a result, many small business owners don’t fully understand what they’re signing—until it’s too late.
How One Loan Can Block Future Growth
Ami Kassar’s story underscores a major issue: once you take on a high-cost loan, traditional lenders (especially those issuing SBA loans) may back away.
That short-term fix can poison your business’s financial profile and limit your funding options for years.
In some cases, refinancing that debt is also tricky. Many banks won’t touch it. And the original lender may have penalties that make early payoff expensive.
What Small Business Owners Should Do Instead
Before clicking “Apply Now” on that tempting loan ad, take these smarter steps:
- Talk to a lending advisor—someone who isn’t tied to a specific lender.
- Run the numbers: Look at total cost of capital, not just daily payments.
- Explore SBA and community bank loans, which offer better rates and longer terms.
- Avoid loans with “confessions of judgment” clauses or personal guarantees you don’t understand.
- Ask how the loan will affect future financing options.
As Kassar himself often reminds clients: “Just because you can get money fast doesn’t mean you should.”
Final Thought: Fund Smart, Not Fast
Alternative lenders aren’t inherently bad. In the right situation, they can help bridge a gap or fund growth. But entrepreneurs need to go in eyes wide open.
Don’t let urgency or flashy marketing cloud your judgment. Capital is fuel—but the wrong kind of fuel can burn your business down, not build it up.
