SCAMS BULLETIN Host Jay White is a volunteer attorney who provides free legal services for low income seniors in San Mateo County, California.

June 11, 2020

SMALL BUSINESS FINANCING FRAUD

Courtesy US Federal Trade Commission

Small business is an important engine in the US economy. But small companies and organizations can be targets for deceptive funders and outright scammers.

Some financing companies lie about their terms, break the law, use terrible debt collection practices, and leave businesses in worse financial conditions than before.

Before you sign to obtain financing:

Read the proposed contract. Read the “fine print” that likely will not be displayed for easy reading. If there is anything you do not understand, ask for clarification.

Find out what the consequences will be if you cannot make payments on time. Then get the answer in writing before you sign.

As an alternate source of funding, check out funding options for your business at the US Small Business Administration’s website: http://www.sba.gov.

Court Case Federal Trade Commission v. Richmond Capital

People also signed a legal document called a confession of judgment. This document let Richmond Capital go to court and get a judgment — without any objection or response from the person — if they stopped paying or breached certain provisions of the contract. But according to the complaint, Richmond Capital used these confessions of judgment to go after people’s assets in circumstances not permitted by their financing agreements. What’s worse, Richmond Capital allegedly threatened violence when people did not pay. The FTC asked the court to make Richmond Capital stop these practices and refund people’s money.

You can tell the FTC.gov about any dishonest practices you experience.