How to Avoid and Report Common Business Loan Scams? - PowerPoint PPT Presentation

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How to Avoid and Report Common Business Loan Scams?

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Title: How to Avoid and Report Common Business Loan Scams?


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HOW TO AVOID AND REPORT COMMON BUSINESS LOAN
SCAMS
www.onlinecheck.com
2
The advancement in lending industry has made it
easier for lenders to integrate technology into
loan process to make funding easier for small
business owners. Unluckily, this advancement also
give a blank check to business loan scams online.
According to the Better Business Bureau (BBB) and
the Federal Trade Commission (FTC) survey of
1,200 small businesses nationwide, 67 of small
businesses said scammers are a growing risk now
in comparison to three years ago. Preventing such
scams is often difficult because scammers
disguise as reputable lenders, big corporations,
and trusted brands.
There are many genuine and reliable online
lenders trying to help small businesses grow.
However, there are hackers and con artists as
well that are capitalizing on small business
owners need for quick funding via scams. These
scammers attempt to embezzle valuable assets like
personal data, business information and money by
masquerading to be reputable small business loan
lenders or brokers. Despite of all these
scammers and Ponzi schemes, there are various
ways to avoid and report such financial scams so
you can recuperate. Heres a detailed guide on
how to become a shrewder and sensible borrower
and avoid such scams.
www.onlinecheck.com
3
Business Loan Scams to Avoid
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Even though small businesses have access to a
multitude of reliable and constructive financing
opportunities, you do need to look out for some
of the deceitful, self-proclaimed lending
institutions or loan brokers.
They usually get in touch with you online, via
advertising, phone, text messages, and direct
mail channels. The key is to remain discreet when
someone asks you for personal and business
information or trick you to make money via
clicking a link. Before agreeing to any contracts
or send anyone your personal information,
ascertain youre conscious of and vigilant
against common business loans scams. Here are
some common business loan scams to keep an eye on
while applying for business loans
Advance Fee Scams
P2P Lending Scams
Grant-Related Scams
Credit Repair Scams
Ghost Funding Scams
Duplicitous Loan Brokers
Debt Relief Scams
Debt Collection Scams
www.onlinecheck.com
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4
Advance Fee Scams
They want a down payment before approving you for
a loan. The advance fee scams are among the top
five marketplace scams. These scammers will also
claim to approve you for a low-rate loan even
with poor credit and history or bankruptcy. This
is definitely a warning signal, since most
lenders have minimum credit score requirements
and constraints on bankruptcies, except for
expensive merchant cash advance companies. In
reality, with a low or poor credit score, youll
likely get lower amount and higher interest rates.
This scam involves when someone offers quick
low-priced debt in exchange for an upfront
payment as an application fee, or a processing
fee.
While being cautious about advance fee scams, you
should also understand the fact that reputable
lenders also charge upfront fees. For instance,
traditional lenders and banks usually charge
upfront fees such as application fees,
underwriting fees, origination fees and credit
check fees before approving your business loan
application. If you ever encounter with an
online lender, especially the one youve never
heard of before, who directly ask you for upfront
money, give the cold shoulder.
www.onlinecheck.com
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5
P2P Lending Scams
Regrettably, numerous dishonest peer lenders are
using social networks and apps to exploit unwary
entrepreneurs. The characteristic of peer lending
scam is similar to the advance fee scam with the
difference that an individual offers a peer loan
instead of a bogus business. Such lenders usually
require an upfront payment to secure your
loanalong with your sensitive personal data to
complete their bogus background checks.
Peer to peer (P2P) lending platforms like
Upstart, Funding Circle, and Prosper Marketplace
have become an increasingly popular source of
business loan funding. Each platform has a huge
network of investors, who decide to buy a loan or
a portion of it that meets their preferred credit
criteria. The network of investors collectively
act as your lender in P2P lending.
The best way to avoid P2P lending scam is to get
help from reputable lenders when considering
peer-to-peer borrowing opportunity. Work
prudently and neither offer any upfront payment
nor use any money wiring services for a business
loan.
www.onlinecheck.com
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7
Grant-Related Scams
The fact is that all information you need to
secure a business loan is readily available
online free and from verified lending
marketplaces and institutions like Merchant
Advisors. Except few targeted grants for research
and development companies and agriculture
businesses, there are no free business grants.
Moreover, the federal government will never call
anyone to avail a grant. You can get all the
information related to government grants on the
official website Grants.gov.
You will also find numerous lenders who will
often ask you to pay them to help you go through
the loan process. Simply forbear this! In such
business loan scams, they might offer you
accessory handy tips to complete your business
loan application, secure government grants, or
qualify for low-interest business loans.
www.onlinecheck.com
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8
Credit Repair Scams
A credit history is the most crucial part of your
financial record. While applying for a business
loan, if someone claims to help you obliterate a
bad credit score or build it overnight, dont buy
this! Such types of scams usually occur in the
area of personal and business credit repair.
Scammers usually target startups since they dont
have a credit history yet.
Even services of verified credit repair companies
usually dont contribute much in the credit
ratings. You can take numerous actionable steps
on your own to improve your credit score. Simply
dont trust on someone who promise to increase
your credit number overnight with a fee upfront.
It takes weeks, even months of financial
discipline to improve credit. The good news is
that you dont certainly need a perfect credit to
apply for a business loan. You will find numerous
reputable lenders whore willing to work with you
even if you have bad credit.
www.onlinecheck.com
8
9
Ghost Funding Scams
They usually ask for sensitive financial
information online including your social security
number for a background check, businesss tax ID
number, legal papers, or financial statements.
Similar to advance fee scams, they might ask for
an upfront fee as well. Such scammers use
personal data about you and your business for
identity theft and other forms of fraud! Ghost
scammers lurk websites that connect borrowers
with angel investors and venture capitalists. In
order to find legitimate investors, you need to
do heavy lifting in order to build associations,
building a pitch deck, and meeting with
investors. Securing equity financing is not a
simple job that gets you quick money overnight
and it actually takes a lot of time to succeed.
In ghost funding swindle, the scammers are
searching for borrowers whore searching for
business funding in the market. They represent
themselves as agents of a big corporations,
financial fund, or wealthy angel investor
concerned in funding small businesses.
www.onlinecheck.com
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10
Duplicitous Loan Brokers
Even though its a legalized service from loan
brokers, but when someone ask you for an upfront
fee, its scam! Legitimate loan brokers services
have commission-based model where a broker get
commission after closing a loan deal and at no
cost to you.
The role of a loan broker is to assist borrowers
find the suitable loan option, arrange all the
essential loan documentation, and connect with
the lenders that are best suited to your
businesss needs.
In this scenario, a duplicitous broker promise to
connect you with a legitimate lender.
www.onlinecheck.com
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12
Debt Relief Scams
Debt relief scammers target those people who are
facing difficulties in maintaining their loan
payments. Such scammers promise things like
cutting your loan payments in half or forgiving
your outstanding debt along with your personal
information and business information to analyze
your current credit standing and debt. Some might
even ask your bank account numbers to start the
debt transferring process with an upfront fee.
In order to sustain your debt, its best to
contact your lender to work out a lower monthly
payments plan or extended terms. Debt relief
solutions work best considering youre working
with a reputable lender.
Keep an eye on those who promise to get you out
of debt with guarantee. In reality, debt relief
solutions dont reduce debt level. Instead, it
simplifies monthly payments by combining multiple
loans into one loan with one lower monthly
payment at a lower-interest loan or longer-term
loan.
www.onlinecheck.com
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14
Debt Collection Scams
Another red flag is if the caller isnt familiar
with your loan details, such as the pending
amount or the interest rate. Unless you have a
notice in writing from the lender depicting the
overdue amount and the creditor name, never pay
any overdue debt. Whenever youre in doubt,
look for legitimate lenders to get the business
funding without pondering if youre about to be
conned.
In debt collection scams, scammers look for
borrowers whore short on loan payments or are
unable to repay the loan. If you get a call from
someone using harsh tactics or threatens to get
you to pay the outstanding debt, its a scam.
Because reputable lenders will usually devise a
repayment plan if a borrowers is unable to repay
the loan.
www.onlinecheck.com
12
26
If youre among those business owners who find
yourself stuck in a business loan scam, follow
these steps to minimize the risk and impact of
the scam
Steps to Avoid Business Loan Scams
  • Report the scam to the Consumer Financial
    Protection Bureau (CFPB)
  • File a complaint with your local police.
  • Report identity theft to the Federal Trade
    Commission (FTC).
  • Contact the credit bureaus and place a fraud
    alert on your file

We hope after reading through this, youll be
extra careful moving forward. However, even the
shrewd business owners can get in to this by
mistake. The lending marketplace is growing more
complex and more lenders are entering into the
small business loans arena, you cant be too
cautious.
Applying for a business loan can be daunting,
especially with the availability of a variety of
lenders competing for your small business.
Understanding the difference between a legitimate
and a scammer is hard. The key is to stay
vigilant and ask questions throughout the loan
process. Additionally, you can also minimize the
risk even if someone manages to con you
regardless of your best efforts. Follow the
above-mentioned steps right away and stay
vigilant going forward.
www.onlinecheck.com
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