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Are you seeking a business loan? Before you proceed with sharing any documents with the lender, beware of loan fraud cases. There are several lenders and various types of business loans available in the market with enticing loan offers. While choosing the right vendor you need to be aware of the scams too.

According to a media report, loan scams worth ₹18,746 crore took place in India in FY23. The Reserve Bank of India is taking several measures to control loan scams. With these efforts, loan frauds in India have reduced by 57% in value as compared to FY22. However, it is best to be informed as falling prey to loan scammers’ schemes results in financial losses. Else, it can directly impact the business.

How to avoid these loan scams? For avoiding fraud business loans, you need to understand the typical behaviour of scammers. This will help you in determining the difference between genuine loan offers and fraudulent loan offers. This article will elaborate on tips to recognise business loan frauds to avoid scams.

6 tips to avoid business loan scams

One needs to be aware and take proactive steps to avoid scams. Below are the tips to understand the difference.

1. Check the credibility of the lender

It is of utmost importance that you approach credible lenders. Do thorough research about the lender. Check the email address of the person in touch with you. Also, check if the app or website of the lender is verified. In the interest of borrowers, RBI has stringent regulations that lenders need to follow. Moreover, you can also read reviews about the lender and ask peers about their experiences with the same lander. When you have sufficient information only then proceed with the loan procedures.

One of the credible sources to obtain a business loan is Tata nexarc. We work with credible lenders to ensure authenticity and reliability. You can check loan eligibility and apply online for collateral-free business loans. Compare and accept the best offer as per your needs. It is a complete online and hassle-free process.

2. Be diligent in receiving calls

One must be extremely careful in receiving cold calls that offer loans. Spammers generally call and pretend to be genuine callers from a trusted and renowned bank or NBFC. Also, they usually offer an attractive rate of interest. However, you need to remember a few basic rules.

  • First, genuine lenders do not ask for details such as bank account and credit card number.
  • Secondly, genuine callers are keen to know the borrower’s creditworthiness and ask some questions before approving a business loan. These questions may include details like the purpose of obtaining a loan, the nature of the business, CIBIL score, etc.

On the other hand, scam callers are in hurry to give you a loan of an amount specified by them. Moreover, many smartphones nowadays are equipped with the ability to identify spam numbers and alert users. Although this is not a trusted way of identification but can alert you to be more careful while answering such calls.

3. Do not click on random links

You might receive multiple emails on a daily basis with promotional loan offers. For avoiding online business loan fraud, you need to identify genuine emails over scam ones.

One of the effective ways to do it is by setting up a multi-factor authentication or investing in a security software solution. Alternatively, you can verify the sender’s email id online. Check if it is a valid email id. Also, do not fill in any details on these links.

4. Check with the customer care

If you receive a call or an email mentioning an attractive business loan offer, you can easily get in touch with customer care of the lending company to verify if it has floated such an offer. Generally, a customer care executive will be able to tell you if you are eligible for such an offer.

Business Loan

5. Do not make any advance payment of processing fees

The processing fee is usually needed to be paid after the business loan is approved by the lender. Genuine lenders are usually not in a hurry of receiving processing fees unless the sanction letter is provided to the borrower. On the other hand, one type of scam is to ask processing fees from the borrower before sharing an approval letter. Then, the loan is never disbursed to the borrower.

6. Check the list of documentation to be submitted

One of the major differences between a genuine lender and a fraud caller is documentation. Genuine lenders ask for a list of documents for a business loan that includes KYC documents, financial details, proof of business and so on.

Even if it is a pre-approved loan, the basic documentation still remains. Therefore, always check for a list of documents and the desire of the caller for a lenient documentation process.

Differences between a genuine lender and scam lender

Below is a summarised version of the major differences between the genuine lender’s and scam lender’s behaviours.

Genuine lender Scam lender
Information asked Will not ask about banking, accounting or credit card details Will ask about your accounts or credit card number
Email The email will contain a link to secured page The email will contain a link to a scam page
Processing fee Will not ask for money before issuing a loan approval letter Will ask for money in advance
Documentation Stringent in documentation Lenient in documentation
Process of approval The loan is sanctioned after document verification Loan guarantee is given before document submission

Bottom line is to be alert and avoid business loan scams

Prevention is the best cure. Therefore, it is best to be aware and wary of fraudulent activities while obtaining a business loan. Here are some of the basic rules you can follow to avoid frauds.

  • Answer every call cautiously.
  • Think before you reveal any personal and financial information.
  • Do not make payment of processing fees before loan approval.
  • Beware when you are offered rate of interest on business loans much below the market rate.
  • Analyse the importance of documentation for the lender. Any leniency there is alarming.
  • Seek an expert’s advice if you are not able to determine.
  • Try to identify the urgency and rush in communication.


Swati Deshpande

Swati is a passionate content writer with more than 10 years of experience crafting content for the business and manufacturing sectors, and helping MSMEs (Micro, Small and Medium Enterprises) navigate complexities in steel procurement, and business services. Her clear and informative writing empowers MSMEs to make informed decisions and thrive in the competitive landscape.