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Avoiding Loan Scams

You want money, right? So don't give it away to scam artists in your quest for capital.

This story appears in the March 2002 issue of Entrepreneurs Start-Ups magazine.

You need money to start your business. But you don't want to be a member of the "It Happened to Me" club when it comes to loan scams. According to the Council of Better Business Bureaus, complaints about fraudulent "loan brokers," most operating out of Canada, surged in the weeks before the 2001 holiday season. These so-called brokers request an upfront processing fee, sometimes as much as $3,000, and when the fee is paid--well, kiss your $3,000 good-bye.

With the economy down and more people--business owners and consumers alike--seeking small business loans, it's not surprising that scams are on the rise. "[Loan scams] have been an ongoing problem for many years now, but these scam artists who perpetrate loan fraud get into high gear during periods of economic uncertainty," says Holly Cherico, vice president of communications for the Council of Better Business Bureaus in Arlington, Virginia. "People are [getting] laid off, and these [scam artists] take advantage of that."

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