A recent wave of fraudulent loan scandals has targeted small business owners who may have been denied credit at other lending institutions as they try to create a corporation.
The Better Business Bureau says it has received complaints of loan scammers using more than 75 different names. Most people say that they found the lenders through online or newspaper advertisements. The company’s website often appears to be professional, but the pages are usually taken down within weeks.
After applying for the loan, victims are told they are approved and need to pay an upfront processing fee before the loan goes through. Those who pay never get the loan, and their money is lost.
The BBB says that victims have lost roughly $250,000 to various advance loan schemes nationwide just this spring.
To prevent being scammed, the BBB says that checking a lender’s reputation, legal status and fees are important steps small business owners should take before signing up for a loan. To check a lender’s history, entrepreneurs can look online to see if other people have reported being scammed by the same company. Any up-front fees are generally a sign of a fraud, and all reputable lenders will also be listed with the state’s Department of Finance.