What is one common small business loan scam and how to avoid it?
To help protect you from small business loan scams, we asked entrepreneurs and small business leaders this question for their best tips. From the pyramid scheme scam to the SBA logo phishing scam, there is valuable information to help you guard your business against loan scammers.
Here are four common small business loan scams:
- The Pyramid Scheme Scam
- Angel Investor Scam
- Phishing Disguised as Business Loan Offer
- SBA Logo Phishing Scam
The Pyramid Scheme Scam
This is a common small business scam that promises high returns. This is when someone offers you a high income by recruiting others into the scheme. The more people you recruit, the higher your income will be. As exciting as it initially sounds, the high income that the person mentioned is very hard to achieve in this type of scheme. The big income doesn’t generally come from the products you will try to sell but from how many people you can recruit under you.
To avoid being scammed, always be very careful when dealing with strangers or even people you know. Do your research before making any decisions, and make sure you have a good understanding of the terms and conditions of any loan or franchise you’re considering.
Paw Vej, Financer.com Ltd
Angel Investor Scam
There are many scammers out there who will reach out to small businesses and offer “angel” investment offers from hidden investors. They will claim to be from bigger organizations with large amounts of money ready to help out small businesses. After often asking for fee payments before the loan can be dispersed, they will try to garner important financial information off of you to expand their scam. Trust your gut with these kinds of dealings and always do your homework to see if an investor or organization is legitimate.
Riley Adams, CPA, Young and the Invested
Phishing Disguised as Business Loan Offer
Keep an eye out for offers of loans that are actually only attempts at phishing. The more public your company becomes, the more people gain access to your contact information, including those with bad intentions. Small businesses are known for their need for funds, which makes them a susceptible target. Since checking your credit involves passing over your social security number, it’s important you only respond to lenders you are well familiar with. Keep an eye out for false websites posing as large banks–some of the schemes are truly quite elaborate.
John Jacob, Hoist
SBA Logo Phishing Scam
One of the most common small business loan scams out there is SBA logo phishing. The Small Business Administration, or SBA, uses a very specific logo that is often stolen and used fraudulently in fake emails offering loans. Businesses unaware of this scam often give out sensitive account information or even routing numbers. Using email verification on unknown addresses and identifying the defining characteristics of SBA’s logo are two ways to avoid falling victim.
Loic Claveau, Prometeus Labs