If you’re looking for a business loan, it’s important to be aware of the different types of scams that are out there. Unfortunately, there are many scammers who prey on business owners who are looking for financial assistance. In this blog post, we will discuss four common types of business loan scams: the advance fee scam, phantom or ghost loan, high interest rate scam and ponzi schemes. We’ll provide information about what each scam entails and how to avoid becoming a victim. Stay safe when searching for a business loan!
Common Types of Business Loan Scams
1. Advance Fee Scam
This scam typically involves the promise of a low-interest loan in exchange for an upfront fee. The problem is, once you pay the fee, you never receives the promised loan. If someone asks you to pay an upfront fee for a business loan, beware! This is a huge red flag.
2. Phantom or Ghost Loan Scam
This type of scam occurs when a borrower is promised a loan but the lender disappears after the borrower has paid the upfront fee. If you’re ever contacted by someone offering you a business loan, make sure to do your research on the lender before agreeing to anything.
3. High Interest Rate Scam
This scam involves a lender offering a high-interest loan to a borrower with bad credit. The problem is, the interest rate is often so high that it’s impossible for the borrower to repay the loan. If someone offers you a business loan with an interest rate that seems too high, beware! It’s likely a scam.
4. Ponzi Schemes
This type of scam typically involves promising borrowers high returns on their investment. However, the reality is that the money being paid out is simply coming from other investors’ money, not from actual profits. If someone offers you an investment opportunity that seems too good to be true, beware! It could be a ponzi scheme.
Warning Signs of Business Loan Scams
If someone contacts you trying to offer you a business loan, there are some red flags to look for, such as:
- You receive unsolicited offers for business loans, especially via email or social media.
- The offer seems too good to be true, such as low interest rates or guaranteed approval.
- They ask for an upfront fee for the loan.
- The loan provider is not registered with the Better Business Bureau or has a low rating.
- They are not willing to provide detailed information about their business or answer your questions.
- The communication is persistent and aggressive.
- You feel pressured to make a decision quickly.
- The loan provider refuses to put the offer in writing.
- They ask you to provide sensitive personal and/or financial information upfront.
- The loan provider is located outside of the country.
- You receive a loan offer that you did not apply for.
- The website looks unprofessional or has fake testimonials.
This list is not exhaustive, but these are some common warning signs of business loan scams.
Now that you know about the four common types of business loan scams and how to recognize them, you can be more informed and avoid becoming a victim. Remember to do your research on any lender before agreeing to anything, and if something seems too good to be true, it probably is. Stay safe when searching for a business loan!
To learn more about other types of cybercrime affecting small businesses, visit our business scams page.