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If you're trying to get a small-business loan and someone asks you for upfront fees, stop! You are about to be scammed, says Harold Lacy of The Money Institute, a Golden, Colorado, company that specializes in helping young companies understand business financing.
"Scam artists have different ways of asking for money," Lacy explains. "They might say `Our investors need a feasibility study' and charge you $500 or $1,000--something small to get you into the loop. Then they come back saying the investors need this and that--and charge you for all of it."
Lacy says scam artists often surround the money with international mystique by claiming the investors are in a foreign country in chaos and are trying to get their cash out of the country. Look out for:
- a request for good-faith deposits to demonstrate to mysterious foreign investors that you are serious about getting the loan.
- an ever-changing Caribbean area code, where you are charged for each minute on the line.
- offsetting deposits, where the scam artist takes out a legitimate loan from a small bank and makes payments on it. He or she markets this money as small-business loans, and when you call the bank to investigate, everything sounds legitimate. Scammers then ask for good-faith deposits or money for a feasibility study, but the loan is never made.
Whether scam artists call themselves business brokers, capital investors or investment bankers, Lacy says, "your first warning should be when you have to deal with a representative. You want to talk to the people making the decision."
To protect yourself, check with the Better Business Bureau, the state and local attorney general, and the Federal Trade Commission to see if there are complaints against the business or the individuals operating it. Also request references; legitimate businesses are happy to share their success stories.
Stock Around The Clock
Small-business owners who know exactly what and how much stock they want to trade can take advantage of eBroker, a 24-hour Internet-only brokerage service that lets you trade when it's convenient for you.
Using a personal identification number, users can check stock prices and place orders on Nasdaq and all U.S. stock exchanges at their own pace. Orders placed during nonmarket hours are executed the next market session.
The service is geared toward active traders; to open an account, you need at least $10,000 in cash or securities from which to make investments. Each trade costs $12. Time-delayed quotes are provided free; 24-hour real-time quotes are available for $30 per month.
Keep It Simple
Looking for a simple way to offer your employees a retirement plan? Consider the new Savings Incentive Match Plan for Employees (SIMPLE-IRA).
Approved by Congress last August, the SIMPLE-IRA is available to small businesses with 100 or fewer employees. For a low-cost and flexible retirement plan, try a turnkey SIMPLE-IRA offered by companies such as Boston-based Fidelity Investments.
Fidelity gives employers two investment choices for SIMPLE-IRA contributions. The mutual fund option enables workers to invest in 10 of Fidelity's mutual funds; the brokerage option gives more sophisticated investors the ability to invest in stocks, bonds, certificates of deposit, and all Fidelity's mutual funds as well as those of other companies.
Employers also are required to match employee contributions dollar for dollar (up to 3 percent of a worker's salary) or contribute 2 percent of payroll for all eligible employees, whether or not they contribute.
Fidelity has eliminated minimum investment requirements and participant fees, and is waiving the annual $350 employer fee for 1997.
To educate entrepreneurs about retirement investing, Fidelity offers a free booklet, Retirement Plans for Small Businesses. For a booklet or more information, call (800) 544-5373.
Fidelity Investments, 82 Devonshire St., Boston, MA 02109;
The Money Institute, 22559 Springflower Dr., Golden, CO 80401, (303) 281-9783.