This site is now an "Amazon Associate", we earn from qualifying purchases.

How to Avoid Small Business Loan Scams

small business fraud prevention - loans

There are many challenges to opening a small business, and one that can cause far-reaching problems is falling prey to a scam. From telemarketing scams to groups that promise investors but never deliver, there are many ways that today’s small business owners can be swindled. If you are trying to launch your company and need a loan, falling for a funding scam could destroy your prospects; however, there are several ways you can protect yourself and your burgeoning business.

Be Wary of Upfront Fees

If you are seeking non-traditional methods of funding, beware of companies that require fees up front. This is a common scam that requires you to front a processing fee to ensure that your paperwork is processed as quickly as possible. A similar swindle in this vein is for a lender to promise you a loan that will come to you in a month or two but requires you to pay a holding fee. At the end of the term, the loan never materializes and you cannot get a refund on the fee you paid.

To avoid losing money on upfront fees, research any lending company you deal with. Their history should be easy to search and those with negative reviews or a sketchy lending history should be avoided.

Trust Your Gut

USC reports that domestic spying by the National Security Agency became rampant by the year 2005 but was exposed by journalists and whistleblowers who trusted their instincts about the existence of the programs. Much like these individuals, you should trust your gut when it comes to accepting funding for your small business. Prospects that sound too good to be true often are, and no matter how eager you are to launch your business, you must be prudent and examine funding opportunities from all angles. This is especially true of those that include details that are difficult to unravel.

Do Not Pay for Information on Funding

Alternate funding opportunities are becoming more common as the number of small businesses in America increases. However, there may be as many scams as there are alternate means of funding, and one common scheme to watch out for is companies that sell you funding information packets. This scam involves a company selling you funding information, claim is not available anywhere else, and that it will provide you with an edge over your competitors. In most cases, the information is either false or the packet is never mailed, leaving you out several hundred dollars.

Read the Fine Print

An infographic from USC’s Master of Laws program reveals that fraud has existed in America since the late 18th century. However, the types of frauds perpetrated have grown right along with technology, making it easier for fraudulent lending companies to hide fees and other pitfalls in the fine print of their contracts. You can avoid this issue by reading paperwork carefully and ensuring that you understand every condition of any contract before you sign it. To learn more about how you can get an online llm from USC, visit their website.

Avoiding small business loan scams can be a challenge, especially when you seek out funding online. However, paying attention to details and doing your homework can help you steer clear of fraud and protect your interests.


USC Online LLM - White Collar Crime Infographic University of Southern California’s Online Master of Laws

Peer to Peer Lending and Private Lending Info