While the internet has been instrumental in opening up avenues between small businesses and lenders, it has also allowed room for many business loan scammers. These cybercriminals victimize small business owners by fraud or by stealing sensitive personal information under the guise of offering some help or guidance.
Such scams related to online business loans have caused some hesitation and fear on the part of business owners. Well, to allay the doubts and fears, it needs to be said that the internet is still an excellent platform for business owners to secure funding. You only have to know how to tell the difference between a legitimate online loan and a loan scam.
So, without further fussing, here are the different types of online business loan scams and the ways on how to avoid them.
It’s not easy to find a legitimate business loan. For one thing, you have to understand all that financial jargon. Plus, there’s also the process of examining your credit report, among other things. Some business owners don’t want to go through this complicated process of obtaining a loan, so they fall victim to dubious loan consultants and brokers.
These scammers will offer help to business owners who want to procure business funding, but they will ask for money upfront for their services.
How to avoid: If someone asks for upfront payment online, consider it as a red flag. Keep in mind that legitimate brokers work with reputable lenders for a commission.
Similar to fake loan brokers, bogus lenders will often ask for advance fees from borrowers who want to take out a business loan. They’ll promise that they’ll approve your loan application despite your low credit rating, or give you a lip service that they offer a low-interest rate or an advantageous repayment term.
How to avoid: Such scammers often mask their identities and hide their locations. So, make sure to ask questions and do your research if this lender is legitimate or not. You better look up their official website or brick-and-mortar office. Also, don’t give money if you’re not sure that the transaction is legit. Visit financial sites such as SiFinances to learn more about how to get a real business loan.
Credit Repair Scams
It’s difficult to procure a business loan if you have a poor credit history. That’s why most businesses work considerably to fix their bad credit rating. And this is where scammers come into the picture. They’ll tell you that they have connections with credit agencies and offer you to improve your credit score in exchange for service fees.
How to avoid: It’s not easy to boost your credit rating, and a stranger online couldn’t do some magic to improve it. Remember that if the offer is too good to be true, that person giving you the offer might be a scammer. So, don’t deal with them, especially if they’re asking for an upfront payment.
Ghost inventors do their thing by sending you an email telling you that they want to invest in your business. But, to ensure that you’re indeed the proprietor of the business, you need to confirm your identity by sending them your social security number, bank account number, and credit card number. Then, they’ll steal your identity and use it for criminal activities.
How to avoid: Avoid giving out your confidential information to online strangers. If you’re indeed dealing with investors, don’t hesitate to ask them for their identities and proofs of their being an investor.
Beware of online business loan scams. If you want to procure a business funding, make sure that you’re dealing with legitimate lenders. Do your research, and don’t forget to ask questions to avoid getting scammed.