Business scams are all over the internet. As a borrower, it is essential to be able to spot them before you get scammed. Unfortunately, many lenders are out there looking to scam borrowers out of their money. This article will teach you how to avoid business loan scams and lenders. We will also provide information on what to do if you have been scammed.
Do your research.
Check out the lender’s website and read customer reviews. If you’re unsure, ask for a referral from a trusted source. Unfortunately, business loan scams have increased tremendously especially targeting small businesses. Cons can cover advance-fee scams, peer-to-peer lending scams, consultancy fee scams, ghost investor scams, funding kit scams, or credit repair scams.
The most well-known scams include identity theft, account takeover, and deceptive offers. Identity Theft Even though it gets more attention among consumers, identity theft is a crucial type of business fraud. Identity theft becomes more sophisticated and costly when deployed to commit lending fraud.
To conduct these operations, thieves acquire personally identifying information about a business and its owners and then use their identity to apply for new loans, lines of credit, or credit cards.
Stay away from lenders who require upfront fees.
These are almost always scams. Be very careful when working with businesses that are not registered with the Better Business Bureau. Please do your research on any company before you work with them. Ask around for recommendations from people you trust.
Let’s say you need to borrow money for essential car repairs or keep up with your mortgage payments. A scammer will pose as a lender and promise to get you what you need, usually no matter what your credit history looks like. The only catch is that it requires an up front processing fee. But once you pay the fee, you’ll never hear back from the “lender.”
If something sounds too good to be true, it probably is. This is especially true when it comes to business loans. Be very wary of anyone who promises you a large loan with no collateral and a low-interest rate. These deals are almost always too good to be true and will cost you a lot of money in the long run.
Beware of scams that promise quick and easy money.
Be especially careful of online offers. Be sure to research any lender before doing business with them. Be cautious of lenders who require upfront fees or ask for your personal information.
Scammers took advantage of the pandemic in 2020. As a result, the Internet Crime Complaint Center received over 28,500 fraud reports involving Paycheck Protection Program (PPP) loans, Small Business Economic Injury Disaster Loans, and other COVID-related fraud.
Do not give out any money until you are sure you are dealing with a legitimate company. If something sounds too good to be true, it probably is. Don’t let yourself be scammed!
Many reputable lenders out there can help you get the financing you need for your business. Shop around and compare rates before choosing a lender. Be sure to read the fine print and understand the terms of your loan before signing anything. Getting scammed is not worth the risk!
Check with the Better Business Bureau to make sure a lender is reputable.
A financial institution should be a member of the National Association of Federal Credit Unions (NAFCU) or the National Credit Union Administration (NCUA). The Small Business Administration (SBA) is another good resource for finding lenders, especially small business owners.
Suppose you’re thinking of starting a business and researching scams that target small businesses. The Federal Trade Commission has information on common scams, such as fake invoices for advertising or directory listings. You can also search the internet for “small business scams.” However, be cautious of any offer that sounds too good to be true, such as guaranteeing a large amount of funding with no risk.
There are also various loan programs, including those designated for specific types of businesses, such as women-owned businesses, minority-owned businesses and veteran-owned businesses.
Community development financial institutions, known as CDFIs, nonprofit lenders and reliable online financial service companies can offer loans with affordable rates and competitive terms — even for new businesses or those that can’t qualify for bank funding.
Get everything in writing, including interest rates, repayment terms, and late payment penalties.
Make sure you understand all the terms and conditions before signing on the dotted line. Borrow only what you need, and be realistic about how much you can afford to repay. Don’t be tempted by offers of ‘easy’ money or low-interest rates that seem too good to be true – they probably are!
Be wary of lenders who pressure you to take out a loan or who try to rush you into making a decision. Instead, take your time, do your research, and make sure you get the best deal possible.
If something sounds too good to be true, it probably is! Be careful of business scams and lenders who are not truthful about their products or services. Do your homework, and don’t let yourself be taken advantage of.
With a little bit of knowledge and caution, you can avoid business scams and lenders who are not looking out for your best interests.
Don’t be afraid to ask questions – if something doesn’t seem right; it probably isn’t.
Be especially wary of online offers, and never wire money to someone you don’t know. Unfortunately, financial scams are common, so it’s essential to be as informed as possible.
Many loaning agencies only require a minimal amount of information during the loaning process. For identity thieves, all they need is a few pieces of information — your Social Security number (SSN) or bank account number — to secure a loan.
If you’re ever in doubt, ask for help from a trusted friend or advisor. And remember – if it sounds too good to be true, it probably is!
Following these simple tips can help you avoid being scammed or taken advantage of by lenders. Educating yourself is the best way to prevent business loan scams.