Venture Capital Brokers & The Up Front Fee & Agreement Scam

http://www.eagletraders.com/venture_capital/venture_fraud.htm

Venture Capital Brokers & The Up Front Fee & Agreement ScamScams To Watch For (If you are seeking investment)

If you use a planning to deal with a Venture Capital broker or a middleman to try find you an investor or a venture capitalist, you may be asked to pay a large up front fee in advance before any financing has been obtained.The fee may be called a processing fee, finders fee, or credit application fee. In some cases you will be told the financing is in place in which your asked to pay for insurance to insure the loan or the financing. This scam is known as the insurance fee scam.
Prior to being told about the up front fee you will be put through an exhaustive array of frustrating paper work which will include credit applications, the business plan, references, co-signers, numerous interviews etc..Even if you are told the fee is completely refundable you may very well have trouble collecting the fee (through the court system) if the middleman has no assets.

Just know in this scenario there are thousands of fraudulent companies and fraudulent middlemen who make their living scamming for these processing fees. The agreement between you will be so fine that you may find yourself in the cold as a result of some unconditional clause in the contract. There are hundreds of reasons why you could be denied independent financing under the contact.This processing fee scam has gotten so bad there has been new legislation written in many States and Provinces to protect consumers from such scams. This scam is most commonly found in the mortgage broker and loan broker field.

Have the broker give you the names of 10 to 20 companies where financing has been successfully obtained. NOT REFERENCES. It must be people or companies who can confirm they have obtained financing through the broker.Pick up the phone and call out to these individuals. If you don't get a list of company names assume its a scam and move on. Beware of email addresses without web site extensions that may be hard to trace:(i.e. @hotmail.com @aol.com)

If you are nervous about paying the refundable processing fee insist the money be paid to your lawyer "in trust" who will disburse the funds only when the financing is in place. It must be your lawyer, and not the lawyer acting for the middleman.

There are a number of legitimate middlemen out their who work on a No Find No Fee basis your going to have to call around. A reputable real estate lawyer or securities lawyer should be able to refer you to someone.We are not stereotyping these middlemen. We suggest that if you are dealing with an individual or a company of whom you don't know you must check references. You may even wish to perform a litigation search to see if the middleman has ever been a defendant in a law suit. This basic search should cost you no more than $100.00.