Scams targeting small business loan seekers are increasing. Dishonest “loan brokers” catch small business owners when they are most needy. Now that the economy has taken a downturn, the demand has increased more, and therefore the opportunity for being taken advantage of has risen in direct proportion with the demand. Of course, these scams have always been around, but at times like these they are even more common and easier to fall for. Following are some examples of some common cons and some ideas on how to make sure they don’t happen to you. A very common one is called the “advance fee scam.” A person who alleges to be a loan broker asks for a fee in order to process the loan, a fee that must be paid before the loan can be processed and can be as high as $3,000. Once you hand over the money, you can expect to never see nor hear from this phony broker ever again. Personal information can be just as valuable to these crooks as money. Assurances of low rates or instant approvals are tricks in order to get you to ask for a loan. After which they will then have all your information used on the loan application, which may include Social Security numbers, credit card information and bank account information. Once they have this they can use or sell the information for anything they want, including devious reasons like identity theft. Another example of a fraudulent claim these brokers make involves equipment loans or lease programs. A phone call or letter claiming that you are pre-approved for one of the aforementioned lease or loan programs initiates these. It’s as easy as sending in first and last month’s money, except you must send this in before you receive anything and in the end nothing will come. One thing you must be very careful about is un-requested phone calls, emails or letters from brokers, of course they usually sound too good to be true. Common things to look out for include, brokers who guarantee money without a credit check, or even if you have bad credit or no credit at all. Red flags also include brokers who pressure you to make a decision right away or ask for payment by wire transfer, usually to an overseas address. Just remember a domestic address doesn’t necessarily assure that your money or information is safe. Some of these scam artists will use P.O. boxes or mail drops in the United States, when the actual operation may actually be based outside the country. One good thing to remember is to never send money until you receive the product or service, unless you are absolutely positive you are working with a genuine lender. Other things that are a tip-off includes, lenders who may ask you to lie on your application, no legitimate lender would ask you to perjure yourself. Usually they will ask you to lie about the amount of money you make or what the loan is for. Pressure of any kind, including saying you should accept monthly payments that are too much for you to afford, or applying for a loan that is more than you need is also a pretty reliable sign of a scam. A few more things to avoid being taken in on a scam include: • Any lender who does not provide required loan disclosures, or tells you to disregard them any lender who uses the wrong terms (i.e. calling a one-time loan a line of credit) • Changes the set of terms in the middle of the deal with no or a poor explanation • Refuses to give you copies of any document and any lender who asks you to sign blank forms, even if they promise to fill them in later So what do you do if you are looking for a loan and you don’t want to be taken in by any of these scams? A good idea before you do business is to check them against the Better Business Bureau’s list of complaints. You can also check with your state’s general attorney’s office for this information. Ask for copies of any relevant documents or statements from the lender, including financial statements. Local businesses, especially other small businesses and groups that include local business leaders are always a good idea and resource for recommendations on lenders. You may also want to check with your local branch of the Small Business Development Corporation (SBDC). What does this mean for those whose credit is poor or who have no credit? It seems at first glance that these would be left out in the cold and easy targets for these con artists. There are options for these individuals or businesses. Legitimate lenders can offer options such as high-interest loans for high-risk borrowers. They may even be inclined to include a provision that offers a lower rate after a certain amount of on time payments, or when the business starts earning a profit. This will save you money just as your business is becoming more successful. Unfortunately there are no legitimate shortcuts to getting the money you need, especially with poor credit. The best option is to remember these simple tips and to research and get as many recommendations as you can.

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