If your small business needs a source of additional working capital or business financing, there are a wide variety of sources to choose from, whether it be from a bank, credit union or an alternative lender, among other sources. But with so many sources claiming to offer business financing with competitive terms and conditions, small business loan scams and fraudulent activity have increased significantly over the last few years.
According to the Federal Trade Commission (FTC), in 2020,small business owners reported losing over $2.1 billion to fraud. However, this figure includes all types of fraud, not just business loan scams. Therefore, it is important to be on the lookout for scammers impersonating Penhurst Capital and other lending sources. Below are some tips that can help you avoid being the victim of a scam and protect your small business.
Be careful of phone scams. Phone numbers and caller identities can be faked, so trust your instinct and never provide personal or financial information in response to unexpected calls. Better yet, if you do not recognize a phone number, simply let it go to voicemail and see if they leave a message.
Be wary of pre-recorded messages. If you receive one of these calls, or any call that you believe might not be authentic, do not hit any buttons on your phone or answer any questions. Better yet, simply hang up the phone immediately.
Watch out for fraudulent emails. If you receive a suspicious email, check who the email is from. Scammers may use an address that is very similar to an address you are familiar with. Also note the “reply to” address. Scammers may use an email address that appears to be from one source but the message redirects to another company when you click reply.
Never pay upfront fees for a loan or when securing business financing. Scammers will often say the fee is to cover processing costs, to file paperwork or to ensure you are serious about proceeding with taking out the funds. Legitimate lenders will deduct any fees from the loan amount once it is disbursed and will not ask for anything up front.
Be aware of loan flipping. This is when a lender encourages you to refinance their loan multiple times, while, in turn, charging high fees and interest rates each time. In this case, the borrower may end up with a larger loan balance along with a significantly higher weekly payment. This is why it is imperative prior to securing small business financing that you understand the terms and conditions of the note. Also, avoid repeatedly refinancing an existing loan unless you feel it is beneficial to helping your business.
Be wary of fake loan brokers. These sources pretend to be the middle man between borrowers and lenders, when in reality, they have no connection to legitimate lending sources at all; they are simply out to obtain fees or gather your personal information. This is why it is crucial to do your research on every source you encounter in regard to securing business financing prior to working with them. Be sure to check their credentials and be cautious of any source that is offering unrealistic terms or conditions.
Another way to help avoid a scam is to consider searching for working capital by utilizing networks such as Penhurst Capital. Penhurst has access to multiple lenders, handles paperwork, negotiates on your behalf, and guides you through the application process. Doing so increases approval chances and offers ongoing support for loan servicing and future financing needs.
