Know The Signs Of Small Business Loan Scams And Protect Your Business
Start up business financing is somewhat specialized. Its considered “HIGH RISK” so a lot of banks don’t like to finance them until 
they have at least 3 years time in business. Since it can be difficult to obtain financing, some business owners get desperate and end up falling for a scam. If you are a new business owner applying for a business loan for the first time, you need to be aware of the signs to avoid being a victim of scammers and unscrupulous lenders.
RED ALERT! Terms Of Associated With Business Loan Scams
Guaranteed Loan Approval
If they promise you guaranteed loan approval regardless of your credit history or current financial status. Then you are probably dealing with a scammer.
Legitimate lending companies will need to evaluate your personal credit history and business credit history before extending financing. They will also ask for financial documentation to make sure that you can repay the loan. A financial company that seems unconcerned about how you will repay the loan, is a financial company that will not make the loan! They will make you pay upfront fees and then never fund your loan request.
Offer Low Interest Loans To People With Bad Credit
Unfortunately for business owners with bad credit, the lower the credit score the higher the interest rate. If a lender says to you that they don’t care about your recent bankruptcy, or the fact that your credit score is in the mid 500’s. Be cautious. Yes there are bad credit business lenders out there that are legitimate, but they will never offer you the same interest rate or loan terms as someone with good / excellent credit.
Upfront payment is required
If a company has a lot of upfront fees, walk away. Banks and finance companies make their money by issuing the loan. There are some companies out there that say they need a lot of upfront money to process your loan. Unless you have a signed approval from a bank, they have nothing to process! From time to time, we have seen some of the SBA brokers require some up front money to review the SBA application. But their review fees are generally low and if they can obtain the SBA loan for you, they will us that as part of your application fee. Low fees are acceptable under those conditions. It takes a lot of time and research to get a SBA loan approved. Most people who apply don’t qualify. If they can’t get you approved they will give you back your business plan and application with recommendations on what changes you need to make in order to get approved.
Paying Fees Thru Western Union or PrePaid Debt Card.
Watch out for lenders that require that you pay them their “processing fees” via Western Union or Prepaid Debit card. Neither one of these methods can be tracked, and therefore neither one of these methods will allow you to be refunded if they don’t perform. No matter what they say in a letter or over the phone. If you pay by one of these methods, you won’t get you money back if they prove to be a scam. And the fact that they asked to be paid using one of these 2 methods should alert you to fact that you are being scammed!
No Physical Business Address
Avoid business loan lenders that operate solely over the internet. One of the basic requirements of a legal business is to register a physical business address and business telephone number.
Off-shore Financial Companies
Keep in mind that it’s too easy to create a website and post information to make a fake financial company look like a genuine lending company. Furthermore, stay away from lending companies that offer services online but are located outside the United States. Not only can you end up sending them a lot of money for “processing” your loan. But you risk having your identity stolen and your bank accounts drained, since they will have your social security number, bank account information, and copy of your drivers license!
Irish Taylor is a business loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to business start up, SBA loans and Unsecured loans.
