Small business equipment financing operates with minimal regulation, creating opportunities for exploitation. Understanding common scams helps entrepreneurs secure legitimate funding while avoiding costly mistakes.
The “approval trap” involves fake pre-approvals with unrealistic rates. Companies collect upfront payments—first month, last month, documentation fees—before shopping your deal to actual lenders. Hidden contract language makes these fees non-refundable regardless of outcome.
Fair Market Value leases present another risk. Automatic renewals activate unless you notify the company within specific timeframes before expiration. Business owners have paid five to seven times the equipment value by missing these deadlines.
Red flags include pressure to pay quickly, vague fee explanations, lack of verifiable business presence, and rates that seem too good to be true.
Due diligence matters: Research companies thoroughly through BBB and online reviews. Demand written fee breakdowns. Ask direct questions about payment terms and lease endings. Track all deadlines with calendar reminders.
Legitimate lenders welcome questions, maintain transparent practices, and earn payment only when delivering actual financing.
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