Tisto Chapman, an owner of a Powerhouse Gym in Burbank, Calif., said that in August he paid a St. Louis broker thousands of dollars to help him obtain a bank loan to upgrade his facilities and refinance debt. It seemed like a no-lose proposition, in part because the broker, Richard Saddler, promised to refund him the $12,500 fee if the loan didn’t materialize, Mr. Chapman said. Mr. Chapman later learned that Mr. Saddler had been indicted on three counts of wire fraud. Mr. Saddler pleaded guilty in March and is scheduled to be sentenced July 1. He declined to comment for this article.
The scam that Mr. Chapman said he was victimized by is common, government officials said, adding they have been receiving more complaints about such crimes in recent years.
“Advance-fee loan schemes,” as the swindle is known, have been around for years. Self-described loan brokers demand upfront payments for loans that never materialize.
But the scam has intensified since the financial crisis, as banks tightened lending standards, making it more difficult for small businesses to obtain financing.
In 2013, there were a record 53,833 complaints about advance-fee loans and credit arrangers filed by entrepreneurs and consumers to the Federal Trade Commission, up from 43,070 in 2012 and 44,504 in 2011, according to the government agency.
Entrepreneurs tend to get duped by advance-fee scams because they are confident in their ideas and can overlook some of the red flags that should scare them off, according to consultants and white-collar-crime lawyers.
Some small-business owners are targeted via email, while others become victims when they look online for lenders after being turned down for conventional financing.