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Tips for Carriers: Avoiding Common Business Loan Scams and Logistics Fraud

Triumph Business Capital

July 14, 2020

As if 2020 hasn’t been a difficult enough year, business owners are still facing threats from scammers trying to take advantage of hard times. While you can’t stop all fraud, you can minimize your risk by knowing how to spot and avoid common business loan scams.

Fuel Advance Scams

Fraudulent fuel advances are among the most popular scams in shipping logistics. A false carrier, often using the name of a legitimate trucking company, will book a load with a broker and then request a fuel advance. The “carrier” may even present a falsified bill of lading to make it look like a pickup has happened.

When the scammer receives the fuel advance, they walk away with the money. The broker has paid for a job that wasn’t done and still has to find another carrier to finish it.

How to Protect Your Business from Business Loan Scams

To avoid brokering a load to a scammer masquerading as a legitimate carrier, check the carrier’s phone number or email address against its Federal Motor Carrier Safety Administration (FMCSA) listing.

If you work with a factoring company like Triumph Business Capital, you can use their client portal to run credit checks on brokers 24/7.

Double Brokering

Double brokering usually happens in one of two situations:

  • A broker accepts the job of finding a carrier for freight but offloads that responsibility to another broker without telling the original hiring company
  • A carrier agrees to move freight for a broker but re-brokers the freight to a different carrier

A lot can go wrong with double brokering. The final carrier or second broker could be accepting the job to deliberately engage in fraud, ultimately walking away with the money and leaving the company that hired them holding the bag.

If the middle company that initiated the double brokering deal walks away, the original hiring company and the final carrier are left in difficult positions. The original carrier could have to pay again for delivery of the load, or the buyer could end up with that responsibility.

How to Protect Your Business from Scams

The best way to avoid becoming the victim of double-brokering fraud is to conduct background and credit checks before you accept a job or contract with a carrier. If you have any suspicions, check the company’s business credit report.

Advance Fee Scams

Transportation-specific scams aren’t the only ones that affect the trucking industry. Logistics companies can also fall victim to lending scammers who prey on businesses that need money. They charge “fees” for the services they claim to offer and then walk away with the cash.

One example is the advance fee scam, in which a “lender” promises a low-interest or no-interest loan in exchange for an advance payment. The scammer might frame that payment as an application fee, processing expense, commission, or tax.

Because legitimate lenders may also charge upfront fees, it’s easy for less experienced business borrowers to fall into this trap.

To tell the difference between a fraudulent and legitimate upfront fee, look at the loan itself. Scams will seem too good to be true, and the scammer will use that image to entice you to pay the fee. Steer clear of extremely low or nonexistent interest rates, especially if your credit isn’t top-notch.

Other red flags include unsolicited contact and lenders who refuse to explain their terms. A legitimate lender won’t contact you out of the blue, offer attractive loan terms, and then refuse to give you details.

What to Do If You’ve Been Scammed

If you’ve been the victim of one of these common business loan scams, immediately contact the proper authorities. Notify the FMCSA about activity by fraudulent brokers or carriers. Call your bank if you’ve made an advance payment to a fraudulent lender or broker, and be sure to ask if there are any other organizations you should notify.

Remember, it’s always easier to avoid business loan scams than to recover from them. Triumph Business Capital has helped thousands of companies manage working capital through invoice factoring. We can help you analyze credit for new clients, make sure they are legitimate, and choose the right solution.

Don’t be taken in by scammers—contact us today for funding solutions, credit analysis, customer research services, and more.

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