Five Significant Scams Targeting Small Businesses

There are several current scams targeting small businesses using a variety of methods.  They are designed to exploit the hopes, fears, and trust of business owners. The good news is that with a little foreknowledge and a healthy dose of skepticism, it is possible to protect oneself and one’s company. Here are 5 of the more significant scams used to target small businesses, and some helpful tips for avoiding them.

#1  The Overpayment Scam

The first of our scams targeting small businesses is the Overpayment Scam.  A customer places an order with a small business, and sends a check to pay for it. Problem: the check is more[1] than the amount of the order. Noting the discrepancy, the owner ships the order and sends a check to the customer to cover the difference.

Getting a check for more than the amount of an order might seem like a good problem to have, but in this scenario the scammer will make off with a double haul: the goods delivered, and the check sent by the business owner.

Scammers who use this con send realistic-looking checks, but they invariably bounce. In at least some cases, the checks are from bank accounts that were closed[2] years before.

To avoid[3] this scam, never accept an overpaying check, and never wire funds for any reason at all. Treat any request to wire funds as a red flag. Always collect all information from a customer: full name, address, and telephone number.

#2  The Expiring URL Scam

Websites are invaluable in this day and age, and there is a specific type of scam designed to prey on business owners’ fear of losing them. Scammers send notices to businesses, claiming their URLs are about to expire[4] and they need to renew their registration—for a fee, of course.

Scammers of this type rely on businesses paying first and asking questions later. The best way to avoid this scam is by asking questions first. Any claim that one’s URL is about to expire should be treated with skepticism, and it should certainly be verified before any money is paid out.

#3  The TTY Pre-Pay Scam

For a scammer there’s nothing better than anonymity, and that is precisely what a TTY (from TeleTYpewriter)[5] can provide. Typically used to help the hearing-impaired, TTY systems[6] allows a person to type a message which an operator then reads to the person contacted.

Scammers use TTY operators to place their orders, and they always pay in advance[7] with a credit card—or even with two credit cards.[8] They also ask their victims to pre-pay shipping, and they typically order large items that will rack up large shipping fees.

The card or cards a TTY pre-pay scammer uses will always be valid, and they will always turn out to be stolen. This leaves the victim defrauded of their merchandise and the considerable shipping fees.

In fact, TTY scammers have been known to ask for special order items their targets are likely to have more trouble moving, increasing the likelihood the target will be willing to pay the shipping costs.

The best way to avoid a TTY scam is to ask the person calling to provide[9] both the card verification code and the customer service number, and then inform them that you will verify the information with the bank. Also, avoid[10] shipping merchandise on a pre-paid basis, unless the recipient is a previous customer or the legitimacy of the payment method can be verified.

There are several scams targeting small businesses
The good news for business owners is that with a little foreknowledge and a healthy dose of skepticism, it is possible to protect oneself and one’s company.

#4  The Directory Scam

Every business wants to get its information out in areas where customers will be likely to encounter it, and a certain breed of con artist preys[11] on this desire for exposure.

Directory list scammers ask businesses for their contact information, claiming[12] to be representatives of a business directory who want to verify or renew a listing. In many cases, scammers talk employees into giving them the information.

The scammers’ next step is to send the business an invoice, typically in the amount of hundreds of dollars. There is no actual directory, of course—or at least not one worthy of the name.

When businesses refuse to pay, directory list scammers badger them with collection calls, collection notices, and threats of late fees. They may also threaten the credit of the business, or even the credit of its owners and employees. Other threats include legal action and referral to a debt collector.

The best way to avoid this scam is to not give information to a directory one cannot verify is actually distributed. Someone who claims to be from a directory should be treated as suspect unless proven otherwise.

For business owners who are in this situation, the best remedy[13] is to contact the FTC and the local Better Business Bureau.

#5  The Advance Fee Loan Scam

A rapidly-approved low-interest loan might sound like an excellent deal for an entrepreneur in need of capital, even if there is a “processing fee” or an “application fee” to pay in advance.

The last of our scams targeting small businesses is the Advance Fee Loan Scam.  Advance-fee[14] loan scammers promise low-interest loans and rapid approval, if they even require their marks to fill out a loan application.

Targets are told they need to come up with one or more fees, which for whatever reason cannot simply be rolled into a loan. In a variant of this scam, the con artist offers a business owner a loan in 60 or 90 days, and asks for a deposit to hold the offer open while the putative lender evaluates the business owner for the loan.

Either way, the result is the same: the target receives no money, and they cannot get back the money they paid, either.

The best way to avoid this scam is to simply not accept any loan offer that requires one to pay anything in advance.

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