Update: This article also has an accompanying podcast: Inside Merchant Cash Advance – Episode 2.

Entrepreneurs and small business owners in need of working capital are targets for unscrupulous criminals acting as lenders, loan brokers, or small business financial assistance advisors both in the U.S. and abroad. Their primary goal is to steal personal financial information, like social security numbers and bank information, or press businesses for upfront cash in exchange for some illusory promise that is never fulfilled.

As small business owners turn to new sources of working capital to help grow and sustain their business, they must be prudent and practical when it comes to providing information to companies promising a golden opportunity, but delivers a bag full of rocks.

It’s important to understand how these scammers work to extort money or personal information, so look out for these five ways they try to trick you.

1. Requiring upfront payment or fees

It is almost non-existent for a legitimate lender or broker of working capital for small business to ask for upfront registration payments, fees, or other charges to qualify for funding. If you get a call and it sounds too good to be true, while also tied with a pre-qualification or registration payment, chances are it is too good to be true and these scammers will simply walk off with your money.

If you get a phone call or email from a company asking for upfront fees and payments, simply do not respond or hang up the phone. You can qualify for working capital from companies like Total Merchant Resources, who do not require any registration fees or money up front for any reason.

2. No physical location

If you are approached by a company claiming to be able to provide funding for your small business operations, ask them where they are located. If they share an address with you, do your research to track down their physical address. You can plug an address into Google Maps or Bing Maps and get a street view of the location and you can confirm there is a building or office that exists. If it’s an online only company, they should have a physical address somewhere.

You can also do a WHOIS lookup through GoDaddy or Network Solutions, which will tell you the owner of the domain name pointing to the company’s website. A WHOIS lookup should list the owner’s physical address and contact information. Sure, domain name registrars now sell proxy services to hide domain name owner information from the general public. There are good reasons to do so for some domain owners, but it could be a warning sign if the company you’re thinking about doing business with hides their physical address and contact information behind by proxy service. How do you know it’s a proxy service? The WHOIS search result will probably return information that simply makes no sense as to the rightful owner of the domain name.

3. Cash Advance Lenders

Small Business Owners and Entrepreneurs in a cash crunch who are looking for cash quickly should clearly understand the terms and conditions of these types of loans. While there are many “merchant cash advance” providers who lend money to small businesses who have some credit risk, these unscrupulous cash advance lenders will obscure their terms with catchphrases and buzzwords. What you should focus on is actual cost & payment to ensure that you can afford to pay back the advance or loan at terms that meet with your budget and revenue.  You can always contact Total Merchant Resources for a consultation to review any other offers you may have.

4. Offers to Repair “Business Credit”

Many new startups and small businesses have  yet to build a strong credit profile with lenders, which is why they turn to Total Merchant Resources and other funding sources in the merchant cash advance industry. Some bad actors will offer to help you “fix” your business credit for a fee, but the reality is, your credit can is best fixed with timely payments to creditors while you build your credit history. Buying into “credit fixing” scams will cost you both in time and money, when the company that promised to fix your credit to seemingly make you eligible for a loan disappears, and you’re left spending money you didn’t need to spend. While there are definitely times to work with credit repair agencies, do your research and make sure they are reputable and have helped someone in your network – you’ll then be able to get a word of mouth recommendation.

5. Watch out for “Guaranteed Loans”

In this industry, there is no such thing as a “guaranteed loan.” Total Merchant Resources and our industry competitors are required to vet your startup or small business through a process in which you must submit documentation of revenue and personal information before we can even reach a decision. If a company states you can get a merchant cash advance “regardless of low or no credit,” that is simply not true and is a huge warning to walk away. Everyone has to go through a credit approval process regardless of what kind of funding they are seeking, so offers to lend money with little to no credit should be a huge warning. There are so many funding sources today, you should be able to ignore these types of offers and find the companies like Total Merchant Resources, that can provide you with the working capital you need, on fair terms, and through an application process.

If you have concerns about any company seeking to lend you money for your small business, please check the company’s history with the Better Business Bureau. You should find positive information or adverse information on the lender and be better able to decide whether you want to work with them.

Total Merchant Resources Merchant Cash Advance Program

We hope that we’ve provided you with good information on which to make your funding decisions. At Total Merchant Resources, we’re proud of the work we do providing working capital to small business owners every day. We require at least 3-months in business with a gross of $100,000 in revenue. Use our online Quick App to submit your basic details and one of our funding representatives will get back to within 24-48 hours with program details and a request for more information to process your application.