Silhouette Of Hands stealing money, scam, fraud. concept: small business loan scams
Betsy Wise
By: betsy_wise
Read in 11 minutes

Small Business Loan Scams: Everything You Need to Know

No one wants to be a negative statistic, especially if that means having first-hand experience with loan scams.

A recent survey conducted jointly by the Better Business Bureau and the Federal Trade Commission provided insights into loan scams: 67% of the small businesses surveyed had seen an increase in scams compared to three years ago.

Amidst that increase, the FTC saw a 10% decrease in loan scam complaints from consumers in 2017. Consumers lost millions but this positive reduction in complaints was due to increased awareness and education about financial scams.

That doesn’t mean that because consumers complain less you can sit back and relax. Plenty of scammers actively steal money from small businesses who aren’t aware of their tactics.

This 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 the blue, you receive a loan-related call, letter, or email from a stranger. 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 prey on people who have low credit scores or bad credit histories because those individuals have trouble getting loans. Loan scams are always accompanied by requests for money in order to process the loan.

How Do You Detect Loan Scams?

  • Back away from someone who requests money upfront before you get a loan.
  • Be wary of anyone using a wire service like 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, legitimate lenders use your bank account to deposit funds electronically.
  • Be leery of someone offering a loan or quoting a rate without checking your creditworthiness. Scammers don’t check your credit history, to corroborate your identity nor to connect with your bank because there’s zero chance you’ll ever receive the money.
  • Don’t agree to send a prepaid debit card. A scammer tells you they need to cover costs like insurance and other fees or will accept the card as collateral to approve your loan.
  • Be on your guard when someone knocks on your door to offer a loan. Be equally cautious 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 succumb 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 all tell-tale warnings you should be aware of.

The Three Most Common Loan Scams

1. Peer lending scam 

Peer lending (sometimes called person-to-person payments)  is when lenders are matched with borrowers without needing to use a bank’s services. Examples of legitimate P2P lenders include Lending Club and

The popularity of P2P lending is how 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.  

A similar variation of this type of scam is someone purporting to be a wealthy investor. They compliment you on your success and that they would have no trouble investing in your business. You’re also told that it’s your responsibility to pay for background checks and legal documents upfront.

2. 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.

3. 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.

What do you do if a loan company scams you

  • Try to remain calm

It’s normal to blame yourself for a loan scam but the real culprits are loan thieves that don’t mind deceiving you to dip into your piggy bank.

  • Write down exactly what happened so it’s fresh in your mind

You’ll need to recall specific details of how the scammer perpetrated the fraud. If you have the information, jot down the name, address, telephone number, and website address of the individual or organization.

By lodging a complaint with the FTC, you help them establish patterns and identify localities and age groups where spammers target the population. It’s also helpful to talk with a complaint assistant who is familiar with these types of complaints and understands your frustration.

You can consider contacting your local law enforcement agency to advise them that loan scammers are alive and well in your area. It’s in your favor to have a police report on file when rectifying financial disputes.

  • Lodge other complaints

The Internet Crime Complaint Center, an FBI subsidiary, processes loan scam complaints and refers them to appropriate agencies for investigation.

The Consumer Financial Protection Bureau is a watchdog organization that protects consumers from unfair, deceptive, or abusive practices. You can submit a complaint with the Bureau and get direct responses from them about your concerns.

  • Keep an eye on your credit

Contact TransUnion, Experian, and Equifax because your credit history could be compromised. They will know to be on the alert for fraudulent charges. You should review these credit agency reports every three months to identify any future identity theft instances.

Review this US government’s website for additional information on scams and frauds.

Camino Financial  Is Your Safest Bet

We are a real company. We are registered with the Department of Business Oversight in California, which gives us the legal ability to lend in all states, except NJ, NC and Hawaii.

We don’t solicit, force or pressure anyone to take out a loan with us.

Potential borrowers find out about our financial services through referrals, contacting us directly through our SSL certified website or by phone.

To safeguard your financial data, Camino Financial uses bank technology throughout the loan process. For example, we use tools like PLAID to gather data from your bank after you give us permission to access your financial information.

Then, we can safely verify your identity and review your current cash flow and business income. The PLAID system uses the same encryption security as your bank. To keep your records confidential, we never gain access to your usernames and passwords.

We use other online tools such as DocuSign to create and sign documents safely and LexisNexis to prevent fraud when accessing sensitive information.

Once you’re approved for a loan, you’ll work closely with a loan specialist to find the best small business loan solution. Funds transfer electronically to your business’s checking account only after you agree to the loan terms. We NEVER ask for money upfront which is a common tactic loan scammers use.

We have many satisfied customers who attest to our trustworthiness and professionalism and recommend our business wholeheartedly.

Remember This

All problems have solutions. Loan scammers are after your money and step up their game as the public learns about this illegal activity. What they don’t know is that you’re on to their deceptions.

By reading this post, you can defend your small business because you won’t fall for their scams. It’s important to stay vigilant to know the ways scammers intend to rob you and your business of its assets.

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