Direct Business Lending

Be Wary of Advanced Fee Loan Scams

Posted on Sunday, June 26th, 2011 at 11:20 pm.

Is Direct Business Lending a scam?

Don’t worry!  We don’t take offense to this question.  With the recent economic downturn there is a significant rise in loan scams reported on the Internet.  It is okay to use caution while searching online for small business loans or startup loans.  This is not a silly question.  It is important to realize who you are doing business with.
We have put together a standard method to identify potential scammers.

Advanced Fee Loan Scams

1.    Request for money to be sent in advance to cover “processing”, “application”, ”insurance”, or the “first month’s payment” are indicators of loan scams. Legitimate companies or even small business lenders usually don’t ask for expenses to be paid upfront for processing an application.

2.    Requests that you “wire” or “send” money, as soon as possible to a large U.S. city or to another country using a money transfer service such as Western Union or MoneyGram.

Example of an Advanced Fee Loan Scam

•    Be wary of unsolicited calls, emails or letters offering you a loan.  Many scams start while people are looking on the internet for either a personal loan or loans for a small business.

•    Once contact has been established you are asked to fill out an application and either fax or email it back to the “company”. The application asks for personal information such as your Social Security number and bank account details.

•    You are quickly told that your loan is approved, often with no mention of a credit check. Or you may be told that they have found a company that is willing to handle your loan.

•    After you are notified that the loan is approved, you are instructed to pay a fee in order to receive the money. They might say it is an insurance payment, legal expense and/or collateral/processing charge; or, that you need to make a few monthly payments upfront. This is the Advance Fee.

•    You are instructed to wire the money to a person through Western Union or Money Gram. For loan scams originating in the US, the money is often wired to a person in Canada. Occasionally the payment is made through a bank transfer.

•    The scammers claim that once the fee is paid the loan amount will be transferred into your bank account or that you will receive a check the next day.

•    Of course, the funds never do get transferred to your account or the check never arrives.

•    The scammers then say that another fee/payment is required or that the lending company changed its mind and they will need to find another lending company. Again you are asked to send via a wire transfer.

•    If the victim decides to cancel the loan after the advance fee is paid, the scammers usually say that a refund will be made “next month”. A refund never arrives and eventually the telephone number is disconnected and/or the website closes and the victim is left with no way to contact the company.

Standard Rules:

1.    Do your homework!  Start with a simple Google search on the company that you are doing business with and look at their website.  Search the address and phone number of their office.  Try to determine whether the company is a legitimate organization.  Perform a Google search for the individual you are dealing with on the phone.  Make sure that individual is not using an alias.

2.    Verify that the company is registered with the Better Business Bureau (BBB) or some other Business Bureau Monitoring service.  You can also search for information on the company through the Federal Trade Commission (FTC).  Legitimate companies are registered with the Attorney Generals Office.

3.    Don’t pay up-front advanced fee for vague deliverables.  Scammers will say anything to get your money.  You must be provided with a plan that will accomplish your objective.

4.    Review all agreements carefully.  If you feel uncomfortable don’t sign any agreements.  If you feel like the agreement is something you don’t understand, seek legal guidance and have an attorney review all the documents that you are signing in.

5.    Use your common sense.  If you are engaging in business with a company and you feel like the company is potentially a scam or fraud, you’re probably correct.  Don’t do business with them.

Finance Options for Small Businesses in a Tight Credit Market

Posted on Monday, April 4th, 2011 at 11:56 pm.

Today’s lending environment poses many challenges to the small business owner. Just a few short years ago, many small business owners were flush with cash and revenues seemed to be steadily increasing. As a result of good cash flows, many business owners neglected their banking relationships and selected to self finance capital acquisitions in lieu of debt. Unfortunately, with the downturn in economic activity this decision has left many business owners asset rich and cash poor.

For those business owners that have weathered the storm, sales remain contracted and many companies have to manage operations with substantial decreases in cash flow. For this reason, many business owners have sought out their primary bank for a working capital cash injection only to find that their primary banker is not lending. For those seeking to finance a specific project or piece of equipment, the answer is often the same; put simply, banks are not lending to anyone but the most credit worthy of customers and any company with a contraction in sales is considered high risk.
After several turn downs from their local banks, business owners are left with few choices. Fortunately, a second tier of lenders exists to serve the needs of small and medium size businesses. These lenders are often private portfolios that cater to specific industries and specific types of lending products for businesses. Furthermore, this second tier of lending solutions is constantly changing with new participants putting out their shingle and old participants shifting their product offerings to meet the demands of the current business borrower. Many of these 2nd tier lenders will say yes when the banks say no; however, finding and navigating the maze of 2nd tier lenders can be time consuming and unsuccessful without having some guidance and understanding of the process.

Some of the options available in today’s tight credit market include both short and medium term financing vehicles beginning with working capital facilities that pay out over 6-9-12 months or equipment leases structured over 36-60 month terms for new equipment purchases. Some providers will finance soft costs, many will not. Some providers will lend against average bank balances and/or credit card receivables and others will only lend against certain types of qualified receivables. Occasionally, a new product offering will emerge that is both competitively priced and structured for many businesses to qualify for. The challenge knows where to go with what type of request so as not to waste time and money fishing at the wrong pond.

For this reason, prudent business owners will often retain the services of a consultant or broker to help them obtain the financing they need to run their business. At Direct Business Lending, we work with hundreds of 2nd tier private lenders so you can focus on running your business while we secure the financing that your banks won’t do. Let’s face it, there simply is not enough time in the day for the typical business owner to do everything that needs to be done, let alone get a handle on the 2nd tier of lenders out there. At Direct Business Lending, we offer up solutions when the banks say no.