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No Small Business Avoiding Personal Loan Scams

Sarah Brooks

October 22, 2014

Fraud affects more than 25 million people in the U.S. each year.

No matter how safe you are, you are not immune to the devastating effects fraud can have on you or your business.

The reality is, though, that many small business owners do need some sort of financial assistance to get up and running. Whether they need to purchase or rent a building, buy equipment, hire employees or develop a product, a loan can help front the initial costs of running a business.

Do You Qualify?

Banks and credit unions are there to help get you qualified for your small business loan.

Those that usually qualify have good credit, a good business idea and have current cash flow with the ability to pay back the loan. They want to see your financial documents along with a detailed business plan, so before applying for the loan, it's best to be as prepared as possible.

Did you know? The average small business loan amount in 2012 was $337,730, according to the U.S. Small Business Administration.

Personal loan scams can range from paying too much in interest rates to completely draining your bank account.

To avoid being a victim of a personal loan scam through your small business, it's best to do as much research as you can on personal loans and know what red flags to look for.

A few red flags include:

• Not wanting you to shop around - Trusted banks and institutions will gladly let you shop around and may even encourage it. If you find a lender that doesn't want you shopping around for rates, run fast.
• Wanting money upfront - It does not cost you money to apply for a loan. If someone wants cash or your credit card number just to apply, this is a huge sign that you may be dealing with a fraudulent lender.
• Wiring money - The article "How to detect and avoid personal loan scams" states that lenders should not ask you to wire money or make a payment to the individual on behalf of your loan. If someone wants this of you, you are most likely dealing with a scam artist and you need to get away fast!
• Not having location information - Any reputable bank or lending institution will have a physical address that they are more than willing to give you. You can then look up the address on Google maps and make sure it exists. The same article says that if the institution isn't giving you their address, you should absolutely refuse to do business with them.

The best way you can avoid getting scammed when applying for your small business personal loan is to take it slow and avoid desperation.

Just because one bank turns you down, that doesn't mean you need to panic. Continue researching different lenders and institutions until you find someone that is legit and willing to lend you money.

Most people wind up falling for scams when they become desperate to get their hands on that money.

Do not be victim to this!!

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