The current economy has unfortunately brought out a lot of bad people. In the last year we have seen fraud on both sides. Some so called brokers and even on applicants for equipment leasing.
Many businesses want to take advantage of the benefits of equipment leasing but they don’t
qualify. This is were scammers come in. They promise to help people who can not get approved in the traditional sense. Since equipment leasing does have flexible credit and time in business guidelines, business owners are taken in by these scam artist.
Do your research
With the advent of the internet you can learn a lot about a company with a simple google search. Google your prospective broker and make sure that they have a good reputation. If you don’t find anything, don’t be alarmed. Equipment leasing is still a mostly offline business. Also since some brokers specialize in equipment leasing for businesses with bad credit, its not surprising that business owners are not jumping up and writing reviews about how there broker helped them despite their terrible credit.
Another tool you can use is the BBB. Again, not everyone belongs to the BBB but at least you can find out if any complaints have been filed agains them.
Call the prospective broker, talk to them and see how comfortable you feel with them. Listen to that little voice in your head, if you feel uncomfortable, move on. There are many different brokers out in the world!
Telltale signs of a scammer
- You have recent credit problems (last year or less) recent foreclosures have only allowed brokers to use financial instruments like equipment sale leasebacksand other collateralized loan programs
- They say they wrap a working capital loan into your equipment lease. Again you either have a loan or you have an equipment lease. Equipment sale leasebacks can be used for working capital or to purchase additional equipment, but again this is a specialized program. When a broker says they are wrapping a loan into a traditional lease, be wary. They maybe inflating the cost of your equipment to cover the loan. This is illegal. How this works is lets say your equipment cost $10,000. The fraudulent broker tells them it cost $25,000 and sends you the client part of that additional $15,000 as a “refund” or draw against your lease. When fraudulent brokers do this, they usually keep a large part of this loan as their fee. I’ve seen them take as much as 40%. Again, this is illegal you want no part of this sort of transaction.
- Unreasonable Up front fees. Fraud brokers will claim they need money before they can tell you if you are approved or not. While there are legitimate brokers that utilize upfront fees before they will work on your account there is a DRASTIC difference in the way their contracts are written. A legitimate broker will send you a letter outlining what kind of term they can get for your equipment lease request. They will say before they are willing to put in a lot of effort in getting your lease request approved by the bank they want you to sign that everything you have stated in your application is true, the funds in your bank account are truly your funds and not additional loans that will need to be paid and the biggest difference will be, on their documents it will state that if they can not get you the terms outlined in their funding agreement, your upfront fee will be refunded.
Why do legit brokers do this? Because of fraud. Unfortunately there has been a rise in fraudulent lease submissions. Sons pretending to be their fathers, partners opening accounts in each others names and so on. As a broker we don’t’ want to fund these people and usually with an upfront fee you will scare them off. It also cuts down on people who will simply waste our time. There are some people who will apply for things just to see if they can get approved and never think about how much time and effort a broker went thru to get then approved.
If its too good to be true…..
The biggest thing that will help you not get scammed is just using good old common sense. If it sounds to good to be true, it usually is!
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Liz Roberts has been in the business financing industry for 20+ years. She got her start in banking, went on to consumer and commercial collections and then onward to becoming a senior credit analyst for several small leasing companies. She has also been a freelance writer for 15 years and has written about business and consumer financing on several blogs. She also maintains a low carb living blog.