Financial scams of all sorts have increased dramatically in modern times with the help of higher internet penetration and lower financial literacy among people.
These scammers have developed a whole lot of tricks and cons to cheat people. They usually target small and micro businesses and enterprises because these business owners usually face difficulty getting a loan. Or sometimes, these small business owners don’t have any collateral, so they fall prey to these scams.
The most common forms of business loan scams are credit repair scams, advance-fee scams, consultancy fee scams, peer-to-peer lending scams, debt collection scams, ghost investor scams, funding kit scams, swindling loans brokers, debt relief scams, etc.
Tips to Avoid Business Loan scams
- Go to Credible lenders – The first and foremost tip is to only go to a credible lender.
If you are applying for a business loan online, make sure the lender has a history of lending. Check if he has been in the lending business for a while because it becomes quite difficult to analyze the credibility of a new lender online.
- Research about the lender – If you are applying for a loan from any loan app. make sure they are affiliated with some bank. Also ensure that the app is recognized by the RBI. Please read the terms and conditions of the loan carefully and make sure all the loan details are mentioned in it.
- Visit the office or any branch of the lender – find the office/branch address and visit to make sure that it is legit business. And more importantly, visit review websites and rating websites to see the previous experience of other people and check if they experienced any fraud.
- Try to avoid lenders on unknown calls – Various lenders may call you to offer a loan, and most of the time, they turn out to be frauds.
Also, these cold callers will try to lure you with their amazing offers, such as they may offer you a business loan at cheap interest rates, which may be too good to be true.
They can also pretend to be calling from a trusted bank or any financial institutions such as NBFCs or Microfinance companies.
- Avoid website links from unknown sources – With the facility of getting a loan online, it comes with the danger of fake links. You may receive tons of emails every day, and any of them can be fraud mail, so verify every time you click on a link.
- Beware of phishing attacks – With fake emails and fake links, scammers can trap you because the fake website may look the same with minor changes that are quite hard to pick. So, try to call the actual lender/bank and verify before applying for any business loan.
- Go to financial advisors – Try to seek financial advice if possible because it can save you from fraudulent business loans. And they can guide you in the various aspects of the borrowing process.
- Lenders will not ask for money immediately – Genuine lenders will not ask you to pay money before the loan approval. The approval process may take time, and so they must ask for down payments or any other payments after your loan is approved by the company.
- Understand the offer – Most scammers will offer you something lucrative or too good to be true, and most people fall for this. They don’t take time to think about it, and most of the time, they will make an impulse decision.
- Loan fee – Actual lenders will not ask you to pay any loan fee immediately at the beginning of the process. If the person is claiming to offer you a business loan but asking you to pay a fee, try to avoid such an offer because most of the time, these are scams. They may also phrase it differently to sound more authentic such as application fee, processing fee, EMI processing fee, etc.
If you are applying for a business loan either online or offline, make sure you don’t fall prey to the financial traps of the scammers. Unfortunately, with time and technological advancement, financial frauds have become very frequent.
So lastly, do your research and due diligence before applying for any business loan.
(Brand Desk Content)