Company deceived businesses seeking loans
Most of the scams I warn about in these columns victimize consumers, but crooks go where the money is and there can be big money in scamming businesses.
The FTC obtained a preliminary injunction against a company that took in more than $37 million from small businesses with deceptive offers for loans.
Business owners searching online for sources of funding to make payroll, buy vehicles, or for other ongoing expenses would find Seek Capital, which targeted new and aspiring small businesses looking for loans or lines of credit.
Its ads called the company “the market leader in business loans for small businesses” and its website advertised the “Best Startup Business loans of 2024.”
Seek and its lead generators touted the easy availability of “business loans” and “business lines of credit” in the tens of thousands of dollars. Borrowers could be approved in minutes.
Note the continued use of the terms “loans” and “lines of credit.”
In fact, once business owners signed a contract with Seek, the FTC said Seek began applying for numerous credit cards, typically in the name of the owner rather than the company. Seek’s fee was 10 percent of the total amount of credit on the cards, which could cost the business owner thousands of dollars.
The businesses never saw, signed, nor approved credit card applications submitted on their behalf. They learned about their new cards when they got a letter from a card issuer about their new credit card, received an invoice from Seek for its hefty fees, or received an alert that their credit score had dropped. Some were surprised to receive a letter declining an application they never submitted.
Seek charged business owners who tried to cancel their agreement an early termination fee of $995, even if it hadn’t submitted an application on their behalf yet.
One business owner said, “…because of Seek’s deceiving practices, I almost went out of business… My business plan got stalled and I did not expand my company as planned…”
A business owner who complained to the BBB about Seek Capital said, “The employees that I conversed with assured me there would be no problem getting the funding that I needed to start my business. They advertise to brand new business owners and they take advantage of the lack of experience. I was not aware that there is zero funding involved. All they did was apply for credit cards in my name and then charged me almost $8,000 to do so.”
The FTC also said Seek distorted its online ratings by pressuring clients to submit five-star reviews even before they received funding, deleting negative reviews, encouraging employees to submit positive reviews, and including illegal clauses in its contracts prohibiting clients from leaving negative reviews about the company.
Seek Capital’s website no longer works, so it may be out of business.
The FTC and BBB offer these tips for businesses looking for financing:
- Consider hometown lenders first.
- If you type “small business loan” into Google, don’t assume highly-ranked results are reliable.
- Don’t click on links in unsolicited emails pitching loans.
- Thoroughly vet any lender, including checking with the BBB, before turning over confidential information.
- Be sure you understand all the terms.
- Consult a trusted expert if you’re not experienced in reading and understanding loan agreements.
Randy Hutchinson is president and CEO of Better Business Bureau of the Mid-South.
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