5 Practical Tips to Avoid Business Loan Scams and Fraud
How to Avoid Business Scams and Fraud: 5 Things Businesses Need to Know
The tactics criminals use to conceal their motives make identifying a business loan scam or fraud attempt difficult. Before proceeding with any business loan, you must follow these steps to protect yourself and your company from potential financial ruin:
1. Do your research on the lender
Don’t let professional-looking websites deceive you. Dig deeper into the lender’s background to establish their credibility; read past customer reviews if you have to! Look for their license, accreditation, and contact information. Fraudulent lenders often hide these details to avoid detection.
Consider contacting them to learn more about their business and the specifics of your application. Credible lenders often have corporate email addresses, so be cautious if you find a Gmail or Yahoo address in their contact information. Additionally, be wary of advance fee scams, where scammers ask for an upfront payment. These are clear red flags.
“Verifying the online legitimacy of lenders found on the internet is crucial for business owners,” Renz Estrella, President of Zenith Capital, emphasizes. “Business owners should combine these verification tips with vigilance and a healthy dose of skepticism when dealing with online lenders.”
2. Read and understand the loan agreement
One of the best ways to understand how to avoid online scams is to read the loan’s terms and conditions before agreeing on anything. In the context of how to prevent fraud, that means reviewing your loan agreement terms diligently. There may be important details in the fine print that you might’ve overlooked.
Examining the loan agreement is crucial for devising your business loan repayment strategy. Look for critical details such as repayment deadlines and interest rate calculations.
You should scrutinize the agreement for vague, incomplete, or inconsistent terms. Watch out for penalties, fees, and clauses that could get you into hot water if not clarified. If you encounter anything you don’t understand, seek clarification from the lender. Blindly accepting a loan agreement without reading it can expose you to business loan fraud.
3. Protect your personal and financial information
Fraudsters, especially from scam loan apps in the Philippines, will always attempt to obtain this information to hack into your systems, steal data, and commit identity theft.
A popular method hackers use to access your device is through phishing scams. They pose as legitimate businesses, luring you through emails, texts, or phone calls to give them your account credentials. Recognize these scams by their offers that seem too good to be true, have an excessive sense of urgency, and have seemingly safe links that are unsafe to click.
Clicking on phishing links gives hackers access to your devices. That’s why it’s best to work with cybersecurity professionals to identify these scams faster. Furthermore, you can apply the following measures to secure your data:
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Use strong passwords:
Create complex passwords that include special characters, uppercase and lowercase letters, and numbers that are difficult to crack.
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Implement multi-step verification:
This cybersecurity feature alerts all authorized users of your account about login attempts.
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Consider encryption.
This cybersecurity standard scrambles your data to make it unintelligible to external parties.
Sharing personal data with fraudulent entities will expose your business to severe ruin. Therefore, you must do everything possible to prevent these scams.
4. Report any suspicious activity or incident
Do you notice anything out of the ordinary while interacting with the lender? For instance, if you’re speaking to a lender in person or on the phone, do they sound needlessly aggressive or too much like a salesperson, acting kindly and exaggerating the benefits of their loan product? If something feels off about your interaction, it’s best to back away.
Report the “lender’s” suspicious activity and behavior to authorities, such as the National Bureau of Investigation (NBI), the Bangko Sentral ng Pilipinas (BSP), or the Securities and Exchange Commission (SEC) immediately to protect yourself and other businesses from potential losses.
“It’s important to note that reporting a scam is a civic duty, and it can lead to the prevention of further fraudulent activities,” Estrella recaps. “It’s essential to provide all relevant information and documentation when reporting to assist the authorities in their investigations.”
Your safest tactic is to consult a financial professional. Beyond teaching you how to avoid business scam attempts, they can help you safely overcome business challenges, such as the lack of cash flow. If you’re new to the lending process, they can help you understand the do’s and don’ts of business loans.