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BBB Alert: Small Businesses Looking for Funding are Increasingly Becoming Victims of Fraud:Business owners report getting taken for as much as $26,000 when applying for loans and grants online

4/2/2008

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ARLINGTON, Va. – April 2, 2008 – As the credit crunch bears down on the U.S., small businesses are forced to search for alternative sources of funding and Better Business Bureau (BBB) warns that business owners are becoming victims of fraud when turning to the Internet for loans and grants.

“While the nation is focused on the credit crunch and its affect on behemoths like Bear Stearns, the impact is also being felt by small businesses that are trying to stay afloat in hard times and are very susceptible to fraudulent loan offers,” said Steve Cox, BBB spokesperson. “The Internet provides a perfect stage for fraud because bad actors in the loan industry can easily portray a professional image that provides unsuspecting small business owners with a false sense of trust.”

Following are examples of recent loan and grant offers BBB has identified as taking advantage of small business owners nationwide:

Mediations, LLC
The BBB serving Connecticut has received complaints from businesses across the U.S. stating that Mediations, LLC (also doing business as Innovations Northeast, LLC) is charging substantial up-front fees for construction loans, but not delivering on the promised funds. Business owners paid fees ranging from $1,500 to as high as $26,000, and were required to pay by wire transfer or cashiers check only. Thus far, complaints to the BBB reveal losses totaling more than $110,000.

BBB Advises: Business owners should never have to pay large sums of money upfront to receive loans, nor should owners wire payment for services because they  will have no way to get their money back if the creditor is not legitimate.

National Small Business Alliance
The BBB serving Los Angeles, Orange, Riverside and San Bernardino Counties has received more than 1,100 complaints from 49 states and the District of Columbia about the National Small Business Alliance (www.natlsba.com). Complainants state they were initially contacted by phone or e-mail and told they were preapproved for a credit line of $8,000 for a one-time membership fee of $99 to $149. Despite what complainants were led to believe by representatives of the company, the “credit line” is not a small business loan, but rather, is collectively comprised of coupons, discounts, and offers made by participating vendors to purchase goods and services such as computers or travel arrangements using credit terms. Complainants say the company continues to deduct money from their bank account without their permission and does not refund money as promised. 

The National Small Business Alliance currently has an “F” rating from BBB for its continued failure to resolve the pattern of deceptive marketing, misrepresentation, false advertising, and unauthorized debits.

BBB Advises: Small business owners should be extremely cautious when providing bank account numbers and insist on reviewing all details of any offer before making a buying decision and signing a contract. Prior to entering into an agreement, small owners can always check out a potential creditor, partner or vendor’s reliability report with BBB. BBB Reliability ReportsTM are free and available online at www.bbb.org.

Capital Funding Programs, and many others.
In 2007, and so far in 2008, BBBs across the U.S. have received hundreds of complaints from small business owners who were burned by online offers to receive government grant money. Using spam e-mails to drive traffic to professional looking Web sites, fraudulent companies have promised to help small business owners rake in thousands of dollars in government grants to start or expand their businesses. As part of the scheme, small business owners have been required to pay several hundred dollars via wire or money order, but then never heard from the phony companies again. 

Capital Funding Programs (formerly www.capitalfundingprograms.com), purportedly of Champlain, NY, is one such company. Since September of 2007, thirty-four victims from 23 states have filed complaints with BBB serving Upstate New York after losing more than $400 each.

BBB Advises: Business owners can research free information on government grant programs at the U.S. government Web site, www.grants.gov. If a company does qualify for a grant of some type, the U.S. government does not request payment as part of the application review or grant award process. 

For more information on the businesses mentioned in this release or additional BBB advice on how small businesses and consumers can avoid fraud when seeking loans and grants, on- and off-line, go to www.bbb.org.

Reporters and journalists may contact Alison Preszler, CBBB’s Media Relations Specialist or call 703-247-9376 to request an interview or additional information.

About BBB
BBB is an unbiased non-profit organization that sets and upholds high standards for fair and honest business behavior. Businesses that earn BBB accreditation contractually agree and adhere to the organization’s high standards of ethical business behavior. BBB provides objective advice, free business BBB Reliability ReportsTM and charity BBB Wise Giving ReportsTM, and educational information on topics affecting marketplace trust. To further promote trust, BBB also offers complaint and dispute resolution support for consumers and businesses when there is difference in viewpoints. The first BBB was founded in 1912. Today, 126 BBBs serve communities across the U.S. and Canada, evaluating and monitoring nearly 4 million local and national businesses and charities. Please visit www.bbb.org for more information about BBB.

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