Crooked Lenders Hurt Franchise Borrowers
The Wall Street Journal reports today how franchise and small business loan brokers manipulate data on Small Business Administration loan applications to gain loan approval for their clients.The SBA in March of this year warned borrowers to beware of loan consultants "if the agent controls all communication between the lender and the business owner, suggests inflating financial sheets, or insists on using specific appraisers to evaluate the business."
If the loan application needs manipulation in order to gain approval the borrower should be especially concerned.
"business owners—wittingly or not—may become entangled in the fraud. "Business owners may think that providing inaccurate information in a loan application is merely unethical," says Mr. Harris, but if "they are caught up in a federal investigation, the government may attempt to prove they intended to defraud the U.S."" - WSJ
This is not to claim that all loan consultants participate in this fraud. There are loan consultants who act ethically and honestly and have the client's best interest in mind. However, once approved, borrowers are now "taking on loans that can't be repaid, which can result in serious financial trouble for the borrower."