The UK’s fraud prevention community, CIFAS, has recently published its 2023 Fraudscape report. In it, they reveal that small businesses have become targets for threat actors, due to the current economic climate.

According to the report, gross lending to SMEs in 2022 was £65.1billion, up 12.8% from 2021 as businesses struggle with energy and living costs. As lenders tighten their criteria, and costs continue to rise, SMEs are being targeted by threat actors posing as brokers offering them help to obtain a personal loan whilst harvesting Know Your Customer (KYC) and Know Your Business (KYB) information through the process. This information is then being used to set up a website using the company information to add legitimacy prior to applying for a fraudulent loan. Many of these scams will start with convincing-looking emails and websites, so organisations should be especially aware of any offer that sounds too good to be true.

Loan scams

There are various ways that criminals can scam businesses through loans including asking for an advanced fee. Businesses who are experiencing cash flow issues can easily fall foul of this type of scam. During the fraudulent application process, the criminals ask you to pay an upfront fee to help secure your loan. Needing money urgently to fix a problem can certainly cloud your judgement so be sure to only use reputable lenders. Remember that scammers tend to use tactics that include urgency and scarcity, so if you’re feeling pressured into agreeing to a deal quickly, and with an upfront payment, it’s most likely a scam.

Look out for unusual repayment terms too, such as wire transfers or payments to individuals; these are huge red flags.

Another way that loan scamming can happen is via debt relief or debt settlement. Those collecting debt fraudulently will often use aggressive language and quickly escalate to threats of legal action. This is textbook behaviour for a scam: using urgency or fear to manipulate businesses into handing over money. If you’re not sure if the debt collection is legitimate, call your lender and find out.

You can find out more information on the ,Financial Conduct Authority website including how to check if a loan company is legitimately registered with them.

Ghost investors

Ghost or fake investors will often approach you unexpectedly, with a funding deal that seems too good to be true. They’ll want to run a background check on you or your business, which often entails obtaining your confidential information and using this for fraudulent activities.

It can be really hard to find the right investor for your business, so if you’re being approached out of the blue by someone and they’re not even asking for your elevator pitch, then this is most likely a scam.

Keeping safe

It’s important to remember that loan scams aren’t the only ways that criminals can get to your business though. In our most recent blog posts, we’ve detailed how businesses can fall victim to phishing, ransomware attacks and remote access attacks if they don’t have the right security, processes and training.

With cyber attacks on small businesses on the rise, it’s never been more vital to protect your business from criminals and fraudsters.

The North West Cyber Resilience Centre offers free membership for small businesses. We also offer affordable training and access to cyber security consultants. Talk to us today to find out more.