From the December 2008 issue of Entrepreneur

You know it's wrong, but you can't stop yourself. You've been eyeing those internet business loan offers with piqued interest lately, positive that a couple of the professional-looking sites must be legit. Watch out: Looks can be deceiving. Websites that appear to be for established financial institutions--complete with flashy graphics and photos--may promise a quick application process and easy loan approvals only to disappear a few weeks later.

In April, the Better Business Bureau reported a spike in the number of complaints about advance-fee loan scams. Many of the hundreds of phony web-based lending organizations that the BBB has received complaints about this year have official-sounding names, such as Central Credit Financial or Corporate Bankers of America. Their websites promise easy business or consumer loans, but often require an upfront fee to process the loan application, which could be as high as a whopping $26,000, says Alison Preszler, media relations manager with the BBB. Customers report that the "banks" then vanish, taking their fees with them.

So how can you avoid bogus lenders online? Start here:

  • If you're unsure about a bank's track record, check its rating with a company that evaluates banks' financial soundness, such as A.M. Best Co. or Bankrate.com. Not all internet-based banks are sketchy: First Internet Bank of Indiana and Giantbank.com are two institutions that Bankrate.com gives high marks.
  • If you can't find an address and contact phone number on the company's website, beware. Resist requests to wire money to an online bank, Preszler warns, as there is no way to recover the funds.
  • Know the law. For instance, it's illegal to require money upfront in order to complete or review a loan application. In general, if it sounds too good to be true, it probably is. "If they say, 'No credit, bad credit, no problem,' that's a red flag," Preszler says. "Don't be lured by a good-looking website or what sounds like a legitimate application process."