Types of Business Loan Scams & How to Be Safe Online
In the digital age, securing a small business loan has become more accessible. The Internet provides many options, making it easier for entrepreneurs to find suitable funding. However, amidst the convenience, there’s a hidden threat – online business loan scams. These scams can harm your business and financial stability. Being informed and cautious is essential to safeguard yourself and your business from falling victim to these fraudulent schemes.
Questions to Ask Yourself as a Borrower
1. Phishing Scams
Phishing is a fraudulent tactic used by cybercriminals to trick individuals into revealing sensitive information such as passwords, credit card and debit card details, etc. They typically disguise themselves as trustworthy entities through emails, messages, or fake websites. Within business loans, these tactics could be emails & SMS with links stating fast business loans, no-interest business loans, etc. As business owners click on these links, harmful hidden links may get activated, which could access the phone and laptop data and steal your important information.
2. Business Loan Fee Scams
Loan fee scams involve fraudsters posing as legitimate lenders who request fees upfront before processing small business loans. They often promise attractive interest rates and loan terms, tempting borrowers into paying these fees. Once business owners pay these hefty fees, the fraudsters vanish, run away, or stop responding. However, borrowers should also be aware that some legitimate institutions take loan application fees, which are reasonable and don’t cost more than ₹2000.
3. Identity Theft & Fraud Business Loans:
Identity theft involves scammers using your personal information and impersonating you to apply for loans. It is primarily observed in small-size auto-approved loans. Actual borrowers are defrauded, and scammers use this amount for personal needs. The most critical link in these types of loans is personal data, which these scammers get from malicious lending websites that steal data from your device.
How do you identify business loan scamming schemes?
1. Too-Good-to-Be-True Promises: Be cautious of lenders promising guaranteed approval or unusually low-interest rates, especially if your credit history is less than perfect. Authorized lenders assess risk and don’t make promises that seem too good to be true.
2. Unrealistic Loan Approval Process: Authorized lenders follow a thorough approval process, considering your creditworthiness, business plan, and financials. If a lender offers a loan without assessing your financial health, it’s likely a scam.
3. Unprofessional Website and Communication: A poorly designed website, frequent grammatical errors, and unprofessional communication are red flags. Reputable lenders invest in a professional online presence and communicate clearly and coherently.
4. Pressure Tactics and Urgency: Scammers often create a sense of urgency, pressuring you to make quick decisions. Authorized lenders will provide ample time for you to review terms and conditions and won’t rush you into committing to a loan.
5. Request for Upfront Payment: Be cautious of lenders demanding upfront fees or deposits before disbursing the loan. Authorized lenders deduct fees from the loan amount or include them in the repayment plan, never asking for payment before loan approval.
6. Lack of Transparency: Authorized lenders are clear about loan terms, repayment structures, interest rates, and any associated fees. If a lender avoids providing comprehensive details or uses complex jargon to confuse you, it’s likely a scam.
7. Inadequate Online Presence and Reviews: Research the lender online. Authorized lenders have a substantial online presence, including positive customer reviews. Scammers often lack such reviews or have numerous negative comments.
Methods to safeguard from business loan scams:
- Research about lenders before clicking any links. A common practice should be checking the lender’s website and trying to connect with the number/email to verify them.
- Check your loan eligibility and compare the loan amount offered to get insight into too-good-to-be-true offers.
- Use trusted channels or registered DSAs (Direct Selling Agents) for applying to specific lenders.
- Read the fine print while agreeing to the terms & conditions of various applications you install.
The Red Fort Capital Difference
At Red Fort Capital, we believe in complete transparency and ethical lending practices. Our commitment to empowering businesses is matched by our dedication to maintaining trust and security. Here’s what sets us apart:
Clear Terms and Conditions: We provide detailed, easy-to-understand terms and conditions for all our loan products.
No Hidden Fees: At Red Fort Capital, we ensure that all fees are fully disclosed, leaving no room for surprises.
Responsive Support Team: Our dedicated support team is always ready to assist and clarify queries.
Focus on Security
Data Protection: We follow stringent security measures to protect your personal and financial information. Within our teams, only the credit analysts working on your case can access files provided only for a specified time.
Compliance with Regulations: Our processes adhere to all applicable laws and regulations to ensure a safe borrowing experience.
About Red Fort Capital
Red Fort Capital is dedicated to empowering Indian MSMEs (Micro, Small, and Medium Enterprises) on their path to business growth through customized business loans. We understand that securing a business loan in India can pose significant challenges, particularly when factors like a less-than-ideal credit score, a relatively short business history, unclear financial records, or variable cash flow come into play.
As a respected Non-Banking Financial Company (NBFC), we take pride in offering a diverse range of secured business loans, spanning from 1 to 10 Crores. What sets us apart is our remarkable ability to disburse funds fast, in just 7 days. Our financial solutions are meticulously designed to cater to a spectrum of needs, including working capital requirements, equipment and machinery purchases, invoice/bill discounting, and last-mile financing, among others.