Investing: How to Spot a Scam

6 Signs to watch out when dealing with a business proposal

When assessing a potential business investment, it is easy to get dazzled by guarantees, assurance and promises of immediate success and high earnings. Big or small businesses should always be alert, think twice and have some research if you encounter any suspicious signs:

1. The business has been running for a short time. The shorter the business has been running, the riskier it is to get involved. It is much safer to get involve or to invest in the business that has survived at least three years of continuous operation. Remember that before doing any investment, you should make sure you are buying into a proven system. If you’re interested in a business that has been operating for a short period of time, research some proof that their system is really working. Ask somebody that already had their services.

2. The business has no company-owned store or branch. If the business is profitable, then the first person to invest in it would be the owner. If the owner is not sure or do not believe that the business would be successful, why would he want to invest in putting up an office or store. The more branches the company has, the better, because it means the owner truly believes in the business.

3. No support team. Without this, the company may only be after the income. You should make sure that if there is an urgent thing happens between you and the company there is always a support team that will guide you in fixing things or else you alone will be working it all out.

4. Your application is approved without investigation. Legitimate businesses should conduct a background check on you or your company, or even a credit investigation (CI) to prove your financial capabilities.

5. Requiring you to make a deposit immediately. You should begin to doubt the legitimacy of a business if you are asked to pay a certain amount right before talking about the business’ system. Be alarmed if you are being asked to pay any reservation or application fees upfront during your first meeting. Upfront payment (usually in some outsourcing company) is acceptable but be sure to conduct a background check on the company or even the owner before doing so.

6. The company is making impossible promises. Companies offering very low cost but with very tempting features or returns should be doubted as well. Study the feasibility of the business well. Any business that promises too good to be true should be carefully examined.

What to do before engaging into any business transaction? Below are some useful tips from fellow customers:
• Talk to existing customers – Ask about their relationship with the company. Are they satisfied with the support given by the company?
• Talk to the directly to the owner and not with the manager or company representative only.
• Personally visit the company’s head office or branch – Interview company officers and staff about how the company operates.
• Check if the company is registered with the government.