Business Loan Scams: As an entrepreneur who may wish to take a loan to set up you business; this is for you. As you go for a business loan; perhaps you need to be aware of the scams associated with loans too.
First, let’s take a look at what kinds of scams you might encounter as a business owner looking for a loan.
Three Most Common Business Loan Scams
1. Peer Lending Scam
Peer lending scam is sometimes called person-to-person payments scam. This scam deals with when lenders are matched with borrowers without needing to use a bank’s services.
The popularity of peer lending scam lending is how scammers lure you to get a loan. A person calls you and promises cash while asking you for personal financial data to complete an application.
2. Funding kit Scam
This business loan scam works by you receive an email or phone call promising an interest-free government funded grant.
And you are told that you can find out more by paying a specialist to walk you through steps on how to apply.
They may offer tips on how to apply for a business loan in exchange for their fee or how to qualify for other financial products.
3. Advance Fee Scam
This scam works by scammers dangling the prospect of low interest rates for a substantial loan amount in your face. This will make you think it is the best deal around.
However, the funny thing is that you will need to pay upfront costs to make that happen. The payment you make upfront is the scam you have prey to. Please be wise.
Also, here, scammers present themselves as expert consultants, loan brokers, and funders. Some claim they can improve or repair damage to your credit by charging a large fee for their services.
Signs of a Business Loan Scam
When considering some business loan scams and how to identify and avoid them, please take note. There are a lot of ways that well-meaning business owners can be duped by con artists looking to make quick money.
What I highlighted above are the most common business loan scams. However, they are not the only forms of business loan fraud that you might encounter.
To help you identify and avoid these and other business loan scams, here are some common warning signs to look out for when considering any business funding opportunity:
· Unsolicited Contact
To know business loan scams, identify and avoid them, take note of cold contact. Cold calling is not a common method among credible business lenders for connecting with new prospective borrowers.
If you hear from someone out of the blue offering you a business loan and you never applied for, consider that your first clue that something might be amiss.
· Non-Traditional Advertising
Also, in order to know business loan scams, identify and avoid them, evaluate the advertising process.
Legitimate business lenders typically do not advertise on Craigslist, personal Face book messages, or yard signs on the side of the road.
If you see marketing messages for a business loan that look out of place, it is probably because they are up to no good. This is a good way to avoid business loan scams.
· Money Requested Up Front
When dealing with business loan scams do not give someone money up front for the purpose of a business loan. Not for an application or processing fee.
There is no reason that you should ever be required to pay money in order to obtain money for your business.
If any lender, loan broker, investor, or platform asks you for any form of upfront payment, end the relationship immediately and move on.
· Lack of Physical Address
Furthermore, if you must know some business loan scams, identify and avoid them, you must be conscious of the physical address of the source.
If you are receiving contact about a business loan from a Yahoo, Hotmail, or generic Gmail account, that’s a clear sign you’re being scammed.
· Guaranteed Approval
Please be aware that among credible business lenders there is no such thing as guaranteed approval.
Thus, if you see advertising or receive unsolicited contact for a business loans that make mention of guaranteed approval, you have most definitely encountered a business loan scam.
· High-Pressure Sales Tactics
Also, in order to identify and avoid business loan scam, be conscious of high-pressure sales tactics.
Does the loan officer or broker you are communicating with a little bit too eager to sign the dotted line on your small business loan agreement? If yes, please be alert and vigilant.
If you are getting the slimy used-car salesman vibe, trust your instincts. Take a pause, and research the validity of your business loan opportunity. This could be just another business loan scam.
What to Do If You are a Victim of a Business Loan Scam
After reading about these common loan scams, you might think that you would never fall for something like this. But even the wisest of business owners can make a mistake.
If you find yourself in the middle of a loan scam, your first steps will depend on whether the scammer stole your money, your personal/business information, or both. Here is what to do if you are the victim of a business loan scam:
Report the scam to the Consumer Financial Protection Bureau (CFPB).
Call your local police.
Report identity theft.
Contact the credit bureaus.
By completing the above steps can minimize the impact of business loan scams. You should also be extra vigilant going forward and work only with well-respected lenders and companies.
In a Nutshell
Applying for a business loan can be intimidating, especially when there are dozens of lenders competing for your business. Knowing who you can trust is difficult.
The best way to avoid business loan scams is to maintain a healthy skepticism and ask questions throughout the loan application process and beyond.
If something sounds too good to be true, that is because it probably is. Despite your best efforts, if a business loan scammer manages to reel you in, there are ways to mitigate the damage.