FUNDING


UPFRONT FEES…ARE THEY A SCAM?


Posted By on Feb 3, 2010

Up Front Fees……Are They A Scam? There has been a lot of talk in the past several months about financial institutions charging barrowers what we call “Up Front Fees” to get a BUSINESS LOAN. When this strategy first came to the market it was a bit of a shock. Borrowers weren’t used to paying someone to find them a loan. Not upfront at least. Borrowers were saying “I’m trying to find money not spend money”. I was compelled to write a bit about this to make sure I clear up the perception of “Up Front Fees”. As we all know times have been tough and it’s been a struggle to stay in business. Organizations of all kinds have had to get creative in their business processes to make sure they can survive another day. One industry that has had to get creative to stay in business is the LENDING COMMUNITY. This market has obviously hit them very hard. In order for many of these firms to stay in business they have had to change their business model a bit. Pre-market crash, any borrower could go to a financial firm to get a loan and that firm would do their best to find that customer a loan free of cost. The financial firm would recoup their cost on the back end by charging a few points on the loan. Well what was happening when the market hit the floor is that borrowers were going to financial firms inquiring about a business loan, the firm said “Sure I will do what I can for you” and the firm would bust their hump for hours, weeks and even months to find that customer a loan for their business. After a few weeks the firm would call the customer saying “I have a solution for you” and the borrowers would say, “No it’s ok, I have found another solution” or, “No it’s ok, I’m no longer interested”. How aggravated would you be if you spent hours and weeks of hard work to help a customer to just have them blow you off in the end? These firms were losing precious hours and money everyday with borrowers that were stiff arming them in the end. The financial firms had to do something about this stay in business. This is where “Up Front Fees” come in. Firms will tell you they need a certain amount of money up front in order to work for you? So what I guess I am trying to say is that “Up Front Fees” are not uncommon in this current market however organizations have taken advantage of the program and...

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