4 ways to spot an SBA loan scam
At the end of last week, the president signed the Coronavirus Aid, Relief and Economic Security (CARES) Act, a $ 2 trillion stimulus package aimed at supporting individuals and businesses during this unprecedented coronavirus crisis. Spot the crooks.
Specifically, security experts say small business owners and sole proprietors accessing the Paycheck Protection Program – which proposes to allocate $ 350 billion in loans guaranteed by the US Small Business Administration – are targets. of choice. “We’re talking about $ 10 billion to $ 20 billion in fraud from this SBA program,” said Hicham Oudghiri, co-founder and CEO of Enigma, a small business-focused data analysis and fraud detection company. While banks typically report general fraud rates of around half a percent, Oudghiri notes that this number will likely increase, as interest in the PPP loans– which are 100 percent guaranteed by the SBA and come with minimal, no-cost credit checks – are expected to skyrocket.
“Banks themselves may be ill-equipped to audit these companies and process-understaffed,” Oudghiri adds.
But there are steps you can take to try to avoid becoming a target. Here are four things to avoid when looking for a new SBA loan:
1. Do not reveal personal financial information.
If you receive calls, emails, or other communications claiming to be from Treasury Department or the SBA offering you grants or stimulus payments in exchange for personal financial information, don’t respond. And whatever you do, don’t provide any private information, especially social security numbers, credit card information, or banking information.
The crooks could use this information to apply for a loan on your behalf and you will have to pay it back. Also note that you only have one option to apply for a loan, according to Ami Kassar, founder and CEO of MultiFunding, a small business loan consultant based in Ambler, Pa.
If you receive notices like this, the Treasury Department recommends contact the fbi.
2. Don’t pay a dime.
If someone or an entity tells you that they can get you a loan faster for a fee, don’t buy it. Loans under the new CARES law are set up so that business owners do not have to pay any kind of related fees – this includes application fees, application fees and closing costs , explains Kassar.
3. Don’t work with unknown lenders.
While lenders don’t have to be on the SBA’s list of preferred lenders to process these loans, they must apply for preferred status before granting your loan, and it’s unclear how long that will take, Kassar says. .
“It is best to go through a federally backed credit union” or a traditional SBA lender, as they will be most familiar with the program and as such will become familiar with the new processes more quickly. he advises. What is better? Go through a bank with which you already have a relationship, explains Kassar. This familiarity with your business could make the loan process easier.
4. Don’t buy quick money promises.
If a business or person tells you that they can get you an SBA loan under the New P3 in a matter of hours, stay away. Lenders are still waiting for advice on how to process these loans. The app is expected to be available from April 3.
If a company offers you an early loan that is unrelated to the new PPP or any other stimulus package, you should also be wary as you could end up with quick repayment terms at outrageous interest rates, explains Kassar.
“If you have a few hundred or thousand dollars a day deducted from your bank account for a quick repayment of a loan you took out, it could create a worse situation for you than the one you find yourself in now,” notes Kassar. .
If you need the cash quickly, the best thing you can do, suggests Kassar, is to go to your current lender and apply for a bridging loan, which can then be refinanced into a PPP loan. You can also apply for an Economic Disaster Loan (EIDL) of $ 10,000 that will not need to be repaid.