Blog/News

Spotting Lending Scams

Sadie Keljikian, Express Trade Capital

Recently, the alternative lending industry has expanded immensely, offering small business owners more funding options than have ever been available before. Unfortunately, this also means that scammers offering fake business loans target small business owners with increasing frequency. Without experience, avoiding these scams can be difficult but, fortunately, there are ways of identifying scams before you get taken in. Here are a few of them:

  • Research your source carefully.

It’s impossible to know everything about a lender before you enter an agreement with them, but where you find the lender (or in some cases, where they find you) is important. Lenders that advertise or reach out to you on networking and social media sites like Craigslist or Reddit are generally not legitimate. Rather than risk losing money to a fake lender, you can use a verified database site specifically designed to provide credible lender options. Vetting is always important, particularly when your business’s finances are involved, so be sure to research your lender as best you can before you commit or put money down.

  • If it sounds too good to be true, it probably is.

Beware of any lender that asks you for an ambiguous fee before approving you for financing if the terms seem too good to be true (I.E. 0% interest, “No credit? No problem!”, guaranteed approval). Many financing arrangements involve upfront fees, but always know who you’re dealing with before you pay up. Generally, a scammer’s only goal is to get you to pay the initial fee, which is why they claim that absolutely anyone will qualify.

With some exceptions, most legitimate lenders have credit requirements for their clients. Even those that offer financing to clients with lackluster or nonexistent credit history will require some other type of collateral and will often charge high interest rates to clients with credit issues. Ads and emails from strangers claiming that you are “guaranteed approval” on your future loan are blatant lies, as no lender can guarantee approval without the client’s financial details.

  • Beware of unsolicited offers and “insider” deals.

As a general rule, financiers don’t reach out to businesses with whom they don’t have any relationship. On the rare occasion that they do, they’ll typically ask if you are interested in their particular services, rather than notifying you that you are “pre-approved” or have otherwise been chosen to receive a special deal.

By the same token, anyone offering “insider” information about business financing, particularly those who claim that they have the scoop on free grants from the federal government, should not be trusted. With extremely rare exception, there is no such thing as a free federal business grant. Besides which, the government isn’t in the habit of hiding grant opportunities from business owners; details on all federal grants are available online.

  • High-pressure salespeople are a sign of trouble.

Any salesperson will have some degree of urgency when they speak to a prospect, but if you’re talking to a supposed lender who insists that you sign on immediately, be wary. This particular issue may not always signify a scam, but any reasonable financier will give you time to sleep on it and come to a decision without a metaphorical gun to your head.

  • Don’t be afraid to ask questions before you disclose sensitive information.

This tip is valuable in any situation involving the transfer of sensitive banking or personal details. Never shy away from asking questions. The right financier will be happy to walk you through the process and explain any aspects that may be confusing.

Another way to avoid giving your sensitive information away to unsavory characters is to research your lending options and learn as much as you can about the mechanics of the type of financing you choose. Knowing as much as possible about how the process works in general will prepare you for the process as it should proceed and make you more likely to notice any red flags.

At the end of the day, it can be tricky to avoid scams, but use your best judgment and acknowledge any red flags you encounter before you give away any money or sensitive information.

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AMS Plans Cotton Fee Increase

The Agricultural Marketing Service has released a statement announcing that it plans to raise the “cotton fee” applied to imported cotton goods from $0.011510 to $0.011905 per kilogram. Adjustments to the fee occur regularly to ensure that assessments collected on imported cotton match those paid on domestically produced cotton.

The announcement stipulates that the new rule will take effect October 16th, 2018, barring significant adverse feedback between now and September 17th.

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New Tariffs Imposed on Turkish Steel

Sadie Keljikian, Express Trade Capital

The president has released yet another tariff-imposing proclamation. The latest in a series of recently implemented “trade remedy tariffs”, the new proclamation will impose a 50% tariff on steel mill products from Turkey and will take effect immediately. The new tariffs have been incorporated into Section 232 of the Trade Expansion Act of 1962 and take aim at countries said to be engaged in “unfair” trade practices.

The president has also hinted that he may double tariffs on Turkish aluminum from the current 10% to 20%, but no formal announcement has been made as of now.

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Peak Wholesale Seasons

Sadie Keljikian, Express Trade Capital

If you’re relatively new to the wholesale business, you may find it difficult to navigate peak seasons for wholesale orders. Without ample experience, preparing for these times of year can be a bit of a scramble, but here are a few tips to help you prepare for the busy seasons:

  • Know when your busy seasons are.

This will depend on your industry, as peak demand for different kinds of products varies. There is no hard and fast rule for this, but generally speaking, the following timelines apply:

Apparel orders generally peak between December and January and then between July and August. Footwear and accessory items peak between late December and early February, then again between late July and early September. Hardgoods tend to peak in late January and early March, then again in August-September.

  • Manage your timeline.

To take full advantage of busy seasons successfully, make sure that you have time to fulfill the orders you receive. You can even implement a deadline for your customers to place their orders with you during the busiest times of year (I.E. holidays, back to school, etc.). Generally speaking, your customers will prefer to submit their orders early anyway, but a deadline will ensure that you don’t end up struggling to keep up with last-minute orders.

  • Favor big orders.

During less busy seasons, fulfilling small orders from your retail customers isn’t a problem since orders are generally staggered, which keeps you from becoming overwhelmed. During peak seasons, however, you may want to set a (reasonable) purchase order minimum, either in cost or in number of units. This will distill your orders to the ones that are most worthwhile and discourage your customers from ordering piecemeal, which can throw a wrench in your production schedule.

  • Assess production costs and plan accordingly.

One of the primary challenges any wholesaler faces is managing the cost of fulfilling orders, particularly when retail customers usually prefer to pay on open terms. If you can manage your operational costs such that you are prepared to spend more that usual on production, you’re in great shape. If not, you may want to consider seeking out financing your purchase orders, receivables, or both. These services are generally inexpensive and will allow you to fulfill larger orders than you could otherwise afford.

  • Ship with care.

If you aren’t experienced in managing your own logistics, you may want to seek out a professional, particularly if your production takes place overseas. Any wholesaler who’s experienced subpar logistical management will tell you that a lot can go wrong when your goods are being transported. If you haven’t developed a solid relationship with your factory yet, it may also help to use a letter of credit in place of a deposit when you place orders with them. The letter of credit will protect you from losing your deposit and ensure that your goods arrive on time and as expected.

  • Be ambitious, but reasonable.

Provided that you prepare scrupulously, there is no reason not to be a bit ambitious in planning for your peak seasons, but be mindful of overextending yourself and your resources. Dreaming big and taking risks is part of the territory for an entrepreneur, but be sure that you do the math and make sure you don’t find yourself stuck without the means to complete your orders.

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Building a Workforce

Sadie Keljikian, Express Trade Capital

You’ve done all the grunt work and you’re finally ready to hire people and get your business up and running. But how are you going to distribute your workforce appropriately without any prior experience to determine where employees are needed most? Here are a few tips to help you efficiently staff your business and get started on the right foot:

  • Identify your business’s needs.

Before you can decide how many people to hire, you need to figure out exactly what your business needs. This may involve some trial and error, but try starting off with the skills you know you’ll need. In a wholesale business, your needs will depend on how much of the process you handle personally. If your goods are manufactured on site, you’ll obviously need to hire people to fabricate your goods and assure that they are up to your quality standards. If you plan to outsource your manufacturing, you can focus instead on hiring competent back office support.

  • Do some research.

If you have no idea where to begin, research similar businesses and find out how they started. Better yet, seek out entrepreneurs in a similar field and ask them who they hired first and how they managed their staff back when they were starting out. It can be difficult to prioritize positions without context, so don’t be afraid to inquire about someone else’s experience and use that information to your advantage.

  • Act as quickly as possible.

Hiring new people at a budding business is daunting, but just one or two more people on your team can have a remarkable effect on your productivity. Obviously, your hiring capacity will be limited for financial reasons, but usually the profit-boost that comes with bringing in new people will more than offset the cost of their salaries.

  • When in doubt, go lean.

If you’re still not sure how to arrange your employees, boil your needs down to the basics and go from there. If you can hire a small number of competent people, you’ll have a great foundation on which to build your company as it grows. It’s always better to have a small group of capable professionals and supplement as needed than to hire a large group of new employees who need more guidance than you have the time or resources to provide.

  • Consider Potential.

Regardless of the initial size of your team, it is wise to consider a prospective employee’s potential as well as their previous experience. Most employees respond well to challenges, so while you should manage your expectations, you’d be surprised how much the average employee can accomplish with a bit of a challenge and the right support.

  • Create a team-driven culture.

In any employment situation, it is crucial to establish a workplace culture that rewards teamwork and collaboration. Since an employee’s potential is generally well beyond the responsibilities required of them at the onset, invite them to get as involved as they are willing and able to be. In any workplace, but particularly a new one, it is important to encourage and allow employees to take ownership of their work and the business as a whole. This dynamic will not only get employees more invested in their work, it will build a stronger foundation for your business as a whole.

At the end of the day, there will be a learning curve involved in the process, but if you hire carefully and conservatively at the beginning, chances are you’ll learn a lot about how to manage your hiring process as your business grows.

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