In a recent study by the Better Business Bureau, 43% of small business owners confessed that they would likely be the target of a scam in the upcoming year. The same study also showed that business owners feel that the risk of a scam is higher today than it was three years ago. These facts are enough to make any business owner concerned about falling victim to a loan scam.
The reality is that many businesses, especially small ones, are looking for alternative forms of financing to help grow and expand. Often times this means applying for business loans online. While online business lending has opened up many doors for small business owners in Canada, fraudulent lenders do exist The silver lining is that there are ways to detect fraud and scams if you know who they target and what their typical characteristics are. Let’s explore these concepts further below.
There are two main types of businesses that are more susceptible to scams: start-ups and businesses under high stress. Start-up businesses tend to be small and inexperienced which makes them more likely to fall for a scam. Even businesses that are past the start-up phase, but are still small, can be more vulnerable because they don’t have as many resources to combat scams. In addition, businesses that are in dire, stressful, or desperate situations aren’t usually thinking straight which makes them more vulnerable to loan scams.
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Scammers commit their crimes by using natural human reactions to their advantage. This enables them to exploit the business or individual thereby allowing them to steal money or gain the information they need. Natural human reactions scammers commonly exploit include:
Knowing what scammers use to commit their crimes is very helpful because it encourages you to think objectively, not emotionally, when doing business.
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The nature of the business and the individuals within it are one thing, but scammers also have their own antics. They tend to operate within certain niches because it’s easy to commit fraud and scams within them. The most popular business loan scams are:
Businesses that work closely with these types of vendors or situations need to be particularly careful since the risk of a scam is higher.
Learn how to avoid these common business loan application mistakes.
Despite the high risk of scams in this day and age, there are ways to detect scams before they happen. More specifically, there are five signs to watch out for. Let’s explore these in-depth below.
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Successful businesses put a lot of time and effort into their internal processes. Not only do these processes improve the efficiency and consistency of a business, but they can also help catch scams before they happen. Below are various ways you can protect your business from scam artists.
Learn how to safely and properly file your business tax return, click here.
Despite your knowledge of scams and efforts to prevent them, you might find yourself dealing with a scam one day. If this is you, it’s ideal if you can report the fraud to prevent it from happening again to someone else. Depending on the type of scam you’ve encountered, there are different governing bodies you can contact, all of which are listed below.
Competition Bureau 1-800-348-5358
Canadian Anti-Fraud Centre 1-888-495-8501
Contact local law enforcement
Contact your bank, financial institution and credit card issuer
Canadian Anti-Fraud Centre 1-888-495-8501
Contact local law enforcement
Contact your bank, financial institution and credit card issuer
Contact Equifax and TransUnion to place a fraud alert on your credit reports
Canadian Anti-Fraud Centre 1-888-495-8501
Contact local law enforcement
Contact your bank, financial institution and credit card issuer
Contact Equifax and TransUnion to place a fraud alert on your credit reports
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Veronica is a writer who specializes in creating unique and educational personal finance content. She has extensive experience writing blog posts for companies in the financial sector. Veronica's background is in accounting as she graduated from Western University in 2017 with a degree in accounting. She is passionate about using her accounting expertise to help others with their personal finance questions and issues and enjoys using her writing to educate Canadian readers. When Veronica is not writing, she enjoys film, reading, travelling, going to the gym, and listening to music.
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