Financing Business Scam...have you seen this one ?

I also frequent a farming forum and it seems quiet a few farmers have been scammed by "legitimate" lenders , I`ve copied one reply that explains how it works , I guess there's the same thing going on with finance for any type of business , your thoughts would be appreciated .

Scenario is Farmer Palmer needs a loan quick due to a couple of bad years , he`s a safe bet as he owns the farm and it can be used as security ...

Farmer Palmer approaches Phillips usually hoping to get a medium or long term loan.Phillips never has the money there and then,or access to this type of borrowing when you need it.But he always has a new scheme about to be launched.Don't worry we can put you into an 'opportunity finance' loan until that scheme is up and running.Opportunity finance is bridging finance, simple as.Anyway the new scheme he is promoting sounds ideal so the borrower accepts,probably taking the long term view and glad to have been accepted.As soon as you agree the papers are delivered to you to sign,very often in hours ! Phillips then instructs a land valuer,you pay,and never see valuation.If you are working to a deadline you will then find the deal slowing right down,and the more desperate you get the more likely the terms will change.It will always be taken up to the wire.As you don't see the valuation they can tell you what they wish at the time,but strangely,very few cases are turned down on the valuation.
The deal completes and then reality hits home,the working capital you had been promised,which is generally to make the investment to service the loan ,will have all but disappeared in a mass of charges you weren't expecting.The problems have started but you still take the long term view,you've had your leg lifted but you'll have to live with it,it would be too expensive to get out of.As the opportunity finance period runs on ,you start to wonder when the paperwork for the new loan will arrive,so you think,I'd better call Des.Next problem,trying to contact them .Business meetings,dentist ,hairdresser,away on business and return calls,no chance.
The opportunity finance term expires,you get a letter calling in the loan,you are now on penalty finance usually 2% pcm.The longer term finance is still being offered,this is to 'keep the meter running',to erode the borrowers equity as much as possible,to take them to a point of no return.When it is eroded sufficiently they appoint their pet LPA receiver,Nick Burd.He will tell you he is your friend.
You are now entering a world of the most accomplished liars you will ever come across.A world where all the professional people know, that payment only comes on sale of the asset,there is no alternative.

The criminal part is first, the lie,to get you onboard,The second will probably be in the paperwork, delivered to you to sign -but not read-and sometimes witnessed by somebody you have never met.The third one is the valuation but you won't see it until very late in the day,probably when you eventually get some worthwhile advice (difficult to find,well beyond your average market town solicitor).The fourth one is then the litany of lies from the other professionals involved,to whom perjury and forgery are part of the working day,court procedure rules a joke and Land Registry rules there to be broken.
And while all this is happening you will have unexplained visits from Trading Standards,EHO,RSPCA,DEFRA vets, just to make you lie down and die.
Don't think this is restricted to UK Acorn,it seems that most of the Bank recovery units are now fully prepared to totally ignore any regulation and carry out their business in a similar fashion,be warned.

Also ......from what i see they use a standard high value agreement.
this requires a business plan showing viability, one i'm looking at
needs certified profits of 1.75 of repayments to be achieved.
plus loan to value ratio maintained.
The scam appears to rely on inhouse or connected professionals
doing the forecast and valuations using unrealistic assumptions.
12 months on and the forecasts and profit ratio not being met,
again using inhouse professionals new forecasts and valuations
with much more pessimistic figures are used and bankruptcy ensues,
helped by high fees for pro services.
The criminal part comes from using linked professionals to fudge the
figures
 

Joshua Slocum

LE
Book Reviewer
was there not a similar scam a few years back, it involved a lender giving farmers loans to build up their business then pulling the rug out and claiming the property ?
 
Yes its that one but its still going on in different guises , I`ve sometimes been bombarded with offers for business finance from the strangest sources , chances are they are upto the same scam.
 
I worked for an insolvency practitioner admittedly for only about six months, but asset striping seem to be the norm

As you'd expect they were there to pick the richest pickings for themselves, not to get the best value from the assets of the business

I doubt they were an isolated case, and with the banks actively pushing small businesses out of business it must be quite a lucrative business
 
I worked for an insolvency practitioner admittedly for only about six months, but asset striping seem to be the norm

As you'd expect they were there to pick the richest pickings for themselves, not to get the best value from the assets of the business

I doubt they were an isolated case, and with the banks actively pushing small businesses out of business it must be quite a lucrative business
Yep , farmers are a good target as they are often asset rich plus not always that wise to con men.
 

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