Don't Get Scammed

Borrowing money? Watch for online scams.
Magazine Contributor
Owner of Make a Living Writing
2 min read

This story appears in the December 2008 issue of Entrepreneur. Subscribe »

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 Not all internet-based banks are sketchy: First Internet Bank of Indiana and are two institutions that 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."

More from Entrepreneur

Kathleen, Founder and CEO of Grayce & Co, a media and marketing consultancy, can help you develop a brand strategy, build marketing campaigns and learn how to balance work and life.
Book Your Session

In as little as seven months, the Entrepreneur Authors program will turn your ideas and expertise into a professionally presented book.
Apply Now

Are paying too much for business insurance? Do you have critical gaps in your coverage? Trust Entrepreneur to help you find out.
Get Your Quote Now

Latest on Entrepreneur

My Queue

There are no Videos in your queue.

Click on the Add to next to any video to save to your queue.

There are no Articles in your queue.

Click on the Add to next to any article to save to your queue.

There are no Podcasts in your queue.

Click on the Add to next to any podcast episode to save to your queue.

You're not following any authors.

Click the Follow button on any author page to keep up with the latest content from your favorite authors.