Whenever a company needs funds to continue its business, expand its horizons, or build working capital, they look towards business loans to solve their purpose. However, financial scams are not rare in the world of business funding, especially targeting MSMEs. While most businesses maintain digital data, hackers can easily track it and use it for their selfish motives.
In the post-pandemic world, business loan scams have become even more prevalent with a greater success rate. Most often, their prey is vulnerable business owners who have been denied loans before. Are you looking for business finance? Use these tips to identify loan scams so that you can spot a legitimate lender.
1. Check for Duplicate Names
To appear authentic, clever scammers invest in a website or business name that sounds genuine. If you are unsure, check with the BBB to verify the lender’s phone number and physical address. Be wary of the lender who only gives their PO box number in place of their mailing address.
2. Never Accept Loan Offer on Phone
For lenders, it is not legal to offer loans on the phone. You may receive many calls from lenders offering you excellent deals at cheap interest rates. If they are too good to be true, they probably are. The lender must give you written business loan documents prominently mentioning all the associated fees, terms, and conditions.
3. Beware of No Credit Check
Legitimate lenders will evaluate your creditworthiness before approving your business loan. Never trust a lender who offers loans on bad credit or no credit. Lenders value their money and want to ensure that they get it back by the loan term-end. Checking your credit score is one way to ensure repayment. If they are not interested in your credit history, they are probably trying to scam you and not concerned about the future.
4. Do Not Pay Any Upfront Fees
Some lenders agree to offer you a lower interest rate on your loan in return for an upfront fee. Whether they ask for processing, documentation, or application fee, they must not ask for any money for performing any service. If they ask you to make an upfront payment using a prepaid card or gift card, run away. That’s a scam.
5. Never Share Your Personal Information
Never give your aadhar number, PAN card number, bank account details, and other personal information unless you are sure of the lender’s authenticity. Scammers may use your personal details for identity theft or steal your bank account.
6. Visit the Lender’s Office
Even if you are applying for a business loan online, ensure that the lender has a physical presence at different locations. A lender who does not have any branch office might be a fraud working only online, and they can quickly run away after scamming you.
7. Never Click on Links Coming from Unknown Sources
With the increasing number of lenders offering business loans online, scam links’ danger has also increased. Out of several emails, you receive every day, some of them may be fraud emails that you should never click on. Never follow a link the source of which you do not know.
8. Do Not Fall Into the Trap of Speed Selling
While applying for a loan, never jump into decisions speedily. Scammers will try to rush you through the loan process and do not give you time to understand the terms and conditions clearly. Speak to the customer representatives directly instead of communicating through live chat or chatbot. Clear all doubts before accepting the loan offer and submitting your business loan documents.
9. Read Online Reviews
Online reviews are influential when it comes to making financial decisions. They can help you identify a lender’s authenticity and pick a trustworthy service provider. A few bad reviews or complaints are acceptable, but if everyone gives an unfavorable impression, take it as a warning sign.
10. Check Customer Service
Reputable and authentic lenders have their customer care numbers that you can call to get your questions answered. If the customer representatives are rude and in a hurry to hang up your call, do not consider them to apply for a business loan.
We have given you a few valuable tips to spot a legitimate lender. Research the lender’s authenticity, call back to reach the company directly, match their physical address, and read online reviews to look for any feedback or warning signs. These tips can help you make an informed decision and stay safe with your finances.
