Stimulus Sparks Loan Scams: 6 Tips to Avoid Small Business Loan Scams
News of stimulus money gives hope not only to small businesses in need, but also to scam artists looking to prey on those seeking government assistance. With headlines publicizing increased federal support for small business loans, small businesses need to be on alert for loan scam artists. Here are 6 tips for avoiding small business loan scams.
- Beware of any loans or financial assistance offered via unsolicited phone call,
email or letter.
- Beware of any lender who guarantees your loan without reviewing your credit, or makes promises that sound too good to be true.
- Beware of anyone who pressures you to make a decision on the spot.
- Beware of anyone requesting payment of fees before the loan is made. Costs such as processing fees are normally taken out of the money loaned, not paid beforehand, and never before the loan has been guaranteed.
- Never make a payment by wire transfer or money order.
- Research any lender or loan broker before doing business with them. Lenders and loan brokers must register with the states in which they do business. Contact your state Attorney General's office or your state's Department of Banking or Financial Regulation to check their registration.
One reason news of increased SBA backed loans brings out the scam artists is because SBA loans do not go directly from the government to small businesses. Private lenders make the loans, portions of which are then guaranteed by the Small Business Administration. This leaves room for scam artists posing as middlemen offering quick access to the government money. Instead, they often disappear with fee payments from the victim and/or that victim's private information such as social security number and bank account information.
For this reason, it is highly important to research any potential lender or loan broker. As a starting point, the Small Business Administration maintains a list of preferred lenders. The SBA bases its Preferred Lender Program on lenders' past performance with the agency.
- Stimulus Prompts Small Business Loan Scams (Business Week)
- Small Business Loan Scams (All Business)
- SBA Warning re Attempts to Obtain Bank Account Info [pdf]
- Fraud Overview (provided by Muller & Sommerville, P.A.)
- The Lowdown on Business Loans (FindLaw)
- Business Loan Resources (FindLaw)
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