Are the hundreds of business funding scam calls, texts, and emails you receive per day making you lose your mind?
You’re not alone; in fact, a recent survey conducted by the Better Business Bureau and the Federal Trade Commission shows that 67% of the small businesses surveyed had seen an increase in scams compared to three years ago.
That’s a lot of junk…
And the latest business scam in circulation adds to this pile of garbage. This scam is catered particularly to taking advantage of those who have applied for loans from the Small Business Administration.
“You’re preapproved for up to $150k…. $750k…. even upwards of $2M.”
While a majority of us can now detect a scam in a matter of seconds, these culprits are constantly refining their tactics to take advantage of us at our weakest points.
Today’s post will help you learn about loan scams, so you don’t become a victim.
What Are Loan Scams?
Here’s an example of how most loan scams work. Out of nowhere, you receive a business finance-related call, email, text message, or even a fax from a stranger. Upon establishing contact, they prompt you to give them personal and financial information so you can find out more about a financial proposal.
Their emphasis is on you receiving cash —fast.
Scammers particularly prey on those who have low credit scores or bad credit histories as these individuals have trouble applying for loans. These funding scams are always accompanied by requests for money in order to process the loan.
How Do You Detect Loan Scams?
- Any time someone requests money upfront before you receive a loan – red flag.
- Be skeptical of anyone using a wire service such as Western Union to fund loans. Most times you can’t track money transfers through a wire service which means there’s no way to get your money back. Remember, valid and credible lenders use your bank account to deposit funds electronically.
- Be leery of someone offering a loan or quoting a rate without checking your credit. Scammers don’t check your credit history or connect with your bank because there’s zero chance you’ll ever receive the money.
- Never send a prepaid debit card. A scammer will tell you they need to cover costs like insurance and other fees or will accept the card as collateral to approve your loan.
- Be extremely cautious when someone knocks on your door to offer a loan and/or if someone advises you by mail or a phone call that you’ve been approved for a loan (if you’ve never filled out a loan application).
- When receiving mail offers, it’s fairly easy for scammers to duplicate legitimate bank and credit card logos. If there’s no physical address on the paperwork, that’s another red flag.
- Don’t give in to pressure tactics. If someone pressures you on the spot to make a decision, they don’t have your best interest at heart. Scammers peddle urgent offers that expire soon convincing you that it’s imperative for you to act now.
- Ask if the lender is registered with the Federal Trade Commission. If they tell you they aren’t required to because they’re an online lender or they operate their business outside of the U.S., they aren’t legit. Legitimate lenders must register their business with the State Attorney General’s Office.
- Be doubtful when receiving a flurry of emails offering you money. Don’t be tricked into opening attachments.
These are clear warnings you should be aware of.
Most Common Loan Scams
- Peer lending scam
Peer lending is when lenders are matched with borrowers without needing to use a bank’s services. The popularity of P2P lending is the manner in which 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. For example, someone impersonating a wealthy investor will compliment your achievements and mention they are interested in investing in your business.
- Funding kit scam
You’ll receive an email or phone call promising an interest-free government funded grant. 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.
The government never calls or emails people asking them to apply for grants since they post the information on a designated website. Legitimate lenders and brokers answer these types of questions for free.
- Advance fee scam
Scammers dangle the prospect of low interest rates for a substantial loan amount in your face, so you think it’s the best deal around. Of course, you’ll need to pay upfront costs to make that happen. Scammers hope you’re “penny wise and dollar stupid.”
Additionally, 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. It’s possible to improve your credit score but doing so involves numerous tasks only you can complete.
When someone uses bait and switch tactics, they unknowingly identify themselves as loan scammers.
Similar to animalistic methods of survival in nature, scammers are quick to prey on your weaknesses.
This is especially true for those who do have a hard time meeting eligibility requirement when applying for business loans. A series of disheartening rejections and let downs in a state of panic makes you more willing to jump at any opportunity – even if it’s a scam in disguise.
To wrap up this comprehensive list of avoiding business loan scams, remember that if it sounds too good to be true, it probably is.
But there’s something else you may not know; whether you are struggling to qualify for a financial loan for your business or maybe you are having trouble paying one back, there are solutions to fit your needs – you just have to know where to look.
Our team of business experts at MCDA CCG, Inc., have a proven track record of seeking out and connecting business owners of all sizes, stages, and industries with the right financial support. On the other hand, if you are struggling to pay back a business loan, our financial advisors can quickly implement steps to get you back on the right track.
Call our office headquarters in Placentia, Orange County, California, email a team member, or if you prefer, reach us here: contact us.
Don’t wait, get in touch today!
Additional Business Support Resources
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