Recently I wrote about how aged corporations can be a tool for building business credit. Unfortunately some companies are using them to promote high-priced “lending” services that are nothing more than a small business version of the classic advance fee loan scams.
Case in point: An entrepreneur recently shared his experience with a company he found online that promised him financing for his venture. Essentially he was told he would be acquiring an aged corporation that would immediately provide him with significant funding through an extensive network of private lenders and investors. He was presented with several options, all with fees ranging from $5500 to $9995 upfront. The “deal” he took was as follows:
Corp #1: $3M revenue with tax returns. $1.5M in profits. Funding in 7 days of $1.65M Fee: $9,995.00 (payment in full required to retain the rights to use for funding purposes)
He’s sent the company his fee of $9,995 and is now awaiting funding promised to him in 7 business days.
Of course, I have zero confidence that this “deal” will come through. In fact, I will not be surprised if this person is told he needs to come up with more money before the deal can “close.”
I was discussing this story with my colleague Erik Salmon, a business credit consultant who has seen these kinds of scams more than once over the years. Erik replied with an answer that I thought would serve as a useful warning for other business owners who might be looking for business financing online.
“That last deal is not going to fund, I have never seen any of these type of deals fund. If you could just pay a broker fee, buy an aged corporation and get millions in funding, the business credit industry would look a lot different.
One red flag for me is that this person’s business associate found a listing on Craigslist. I don’t know about you, but if I were able to deal with high dollar funding deals, I would not be posting them on Craiglist. That’s where you go to advertise to unsophisticated business owners who make easier marks for scams.
Another read flag is there was no mention of any type of qualification process other than the paying the broker fee and buying an aged corporation. Saying a company has “financials” is not saying much. How did the company get financials? What lender or investor is going to provide high dollar funding just on financials? There has to be a physical location, employees, assets, business history, etc.
Another red flag is the domain registration information. It looks like to me that they just registered the site not that long ago, and it is expiring in September. Typically if a business plans on staying around – and for search engine optimization purposes – you register a domain for 5-10 years minimum, see below:
Domain Name: (removed for this post)
Registrar: GODADDY.COM, INC.
Whois Server: whois.godaddy.com
Referral URL: http://registrar.godaddy.com
Name Server: DNS1.MIDPHASE.COM
Name Server: DNS2.MIDPHASE.COM
Updated Date: 18-dec-2009
Creation Date: 30-sep-2008
Expiration Date: 30-sep-2010