This mornings Wall Street Journal's headline "Banks Open Loan Spigot" is greatly exaggerated. While some banks are reporting a small increase in lending to companies with $50 million in annual revenue, access to small business loans will likely continue to be difficult in 2011. This continued tight lending market, however, is creating a vibrant marketplace for business loan scams.
Swindlers have grown more creative with ways to scam increasingly desperate small business owners in search of working capital to help them through a difficult economic climate. Less common are business loan brokers who require and up front or advance fee as entrepreneurs have caught on to these scams. However, schemers have become more imaginative in pursuit of your money.
If you are looking for a small business loan, watch out for these scams and any other that seems to good to be true:
1) A Texas man cheated $1 million from people based on his promise to sell them existing corporate entities with usable credit lines.
2) Two New Yorkers pulled in over $7 million in fees by promising access to a $23 billion Federal Reserve note.
3) Another New York was sentenced to 20 years for taking up front payments for access to bank instruments worth millions.
Scams like these have been going on for years, so reminders
like this always seem like a good idea. As a rule, do not pay "advance loan fees", research any company promising financing and remember, if it sounds to good to be true...
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- President Obama, Small Business Loans and Failed SBA Policy
- Why Small Business Loans Don't Work for "Real" Small Business Owners