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Loan Scams: How To Keep Businesses Protected

Whether it is for business expansion or to finance a lack of working capital, securing loans can often be crucial for the survival and success of SMEs in Singapore, especially startups. However, obtaining bank loans can be tough for small businesses due to the stringent loan assessment process and only piles onto the stress already experienced due to the lack of funds. When this occurs, business owners may become more anxious and thus more susceptible to trusting scammers disguised as lenders and fall victim to loan scams in Singapore.

The threat of scams, such as phishing scams, grows alongside our increasingly digitised world. This prevalence was covered by an article by The Straits Times which reported on the rise in the number of scam incidents, with digital means such as text messages and web pages being the main platform for these incidents. A total of $9.3 million was lost through loan scams in 2022 by victims of all ages and occupations and phishing scams were the most common scam method.

In the same year, the Singapore Police Force also warned of PayPal scams involving a new variant of technical support scams involving impersonation. Impersonation scams are also common on LinkedIn, with users falling prey to LinkedIn scams since it is common for strangers to reach out to connect for networking purposes. Therefore, the threat of falling prey to scams must not be taken lightly.

In order to protect yourself and your business from becoming a victim, you should stay ahead of the scammers by learning how to identify the warning signs and taking protective measures against loan scams. This article seeks to provide tips on how to keep your business safe.

Stay ahead of the scammers and protect your business from loan scams that could take away everything you have been building and ruin your business dreams.

Identify The Warning Signs Of Scams

Awareness is an important line of defence against loan scams. Businesses should be vigilant and learn to recognise the common warning signs that may indicate a potential scam. These signs may include:

1. Too Good To Be True Offers

Private lenders are more flexible, have a shorter loan assessment process, and provide businesses with quicker access to funds. These key factors are what separates loans from private lenders and bank loans.

However, as the business model of private lenders is that they profit off charging interest rates on the loans awarded, those willing to grant interest rates that are significantly lower than the market rate present seemingly too-good-to-be-true offers. It would be an even glaring red flag if the company offers zero percent interest rate! Additionally, another “selling point” that scammers may make is offering guaranteed approvals especially before an application has even been made. No loan application is ever guaranteed, much less before an application is made, and is possibly an attempt by scammers to lure unsuspecting or overly anxious applicants.

2. Pressure Tactics

Offering guaranteed approvals can also fall under a pressure tactic used by scammers. They may also apply time-sensitive deadlines to use the sense of urgency to force your business into making an uninformed decision you might regret. This tactic hinges on business owners fearing that they may miss out on an offer that is too good to be true.

Nevertheless, business owners should demand sufficient time to review and understand the terms of the loan. It would be highly inappropriate and unethical for a lender to induce pressure tactics to get your business to commence a loan application with them and possibly indicate that the whole ploy is a scam.

3. Upfront Fees And Documentation

Another clear indication that an offer could be a loan scam is when the lender asks for upfront payment of loan fees. These scammers may simply disappear immediately after receiving the fees. In general, the repayment of interest rates and any fees payable should be deducted from the total loan amount your business will receive. There should be no reason to provide upfront fees to any lender before the loan has been funded to your business.

Moreover, these scammers may request for personal information to be provided in advance to “facilitate the lending process”. This could likely be a ruse to conduct phishing scams which involves scammers stealing confidential information to access your accounts. Business owners should recognise that confidential information such as credit card details and login information to any websites, especially sensitive ones such as SingPass, should never be requested by legitimate lenders.

4. Lack of Transparency

On the other hand, while some scammers may insist on upfront fees, others may conceal or make up various “fees” into the terms and conditions of the loan. These scammers profit from the lack of transparency as they attempt to charge fees that may be inapplicable or parked under the guise of “administrative” and other unreasonable claims. These “fees” may not always be of exorbitant amounts and may consist of multiple charges that total to a considerable amount.

Therefore, it is crucial that you perform due diligence and review the terms and conditions before entering into any contract, especially a loan agreement. It could also be safer to work with a trusted private lender that prides itself on being transparent, like Poss. With transparent payment schedules and interest charts, you will not have to worry about hidden fees in your terms and conditions. Find more about our quick and easy business loan process here.

Be sure to take note of the terms and conditions of the agreement before signing them. Keep a look out for hidden fees or any changes made without consent, such as amendment of the interest rates, by the scammer.

Take Protective Measures Against Scams

a. Performing Due Diligence

You should perform your due diligence and research on the lenders that you have shortlisted before commencing with any loan applications. This might include finding out how experienced they are in the industry, conducting background checks on their credentials, and even simple information such as the location of their office in Singapore. Most of this information can be found on a lender’s website which any legitimate lender should have. Looking out for reviews or testimonials from other businesses may also provide some assurance that a lender is credible.

To further aid in performing due diligence and navigating the threat of loan scams in Singapore, the Scam Alert Singapore website can also be a great resource to explore. The website offers business owners a platform to share their loan scam experiences and educates readers on how to recognise scams in Singapore, especially phishing scams. Scam Alert Singapore also reports the latest and different types of scams in Singapore to allow readers to stay informed and stay ahead of the scammers.

For example, Scam Alert Singapore warns of the prominence of recruitment scams, such as Capgemini scams, where incidences of scammers reaching out pretending to be recruiters from Capgemini were reported by some users. Hence, the next time you encounter a suspicious link, webpage, or message, checking out the Scam Alert Singapore website might help you better discern if it could be a scam.

b. Read Terms And Conditions

Another prevention measure would be to read the terms and conditions of any contract carefully before signing the agreement. This is no different, if not more crucial, for a loan agreement as scammers might conceal hidden “fees” or “charges”, or even alter the interest rate within these terms and conditions. Through this, you may also realise that an offer might be too good to be true and gain clarity that you might be in a scam situation.

c. Use Secured Channels For Communication

Lastly, business owners should communicate and share sensitive information only through secure channels. Scams, especially phishing scams, may also take place in messaging applications and email through unsolicited links from unknown sources, so do not assume that all communications through these platforms are secure. Hence, in order to protect your data during transmission, ensure that the private lender’s website has encryption (i.e. has “https://” at the front of the web address) and do not click on any suspicious links.

Scam Alert Singapore documents personal recounts of scam victims and the negative impacts they faced to appeal to readers to stay vigilant against scammers. They also provide information on the types of scams, such as PayPal scams and LinkedIn scams, and report the latest scam incidents.

Finding A Trusted Lender 

As the prevalence of loan scams in Singapore poses a significant threat to Singapore SMEs, these tips may provide some insights into keeping your business protected. It is also crucial that your business works with a lender that is trusted and credible.

Poss has had the pleasure of working with many business owners to secure their additional financing needs. We have no early prepayment fees, prorated interest payments and offer a quick, fuss-free borrowing experience. Contact us, and let us help you focus on effectively growing your business without any concerns or worries.

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