John Johnson’s landscape company was on its last legs, so when John got a call from Capital Funding, Ltd., offering a non-secured loan, he thought it might be his last chance to keep the business afloat. The loan officer explained that the government was promoting loans to keep small businesses from folding during the recession, and that his company qualified. John knew his credit rating was terrible, but he didn’t want to lay off his staff of six and look for work himself, so he put aside his doubts and showed up at the office to fill out the paperwork. The gentleman was professional and reassuring. Two days later, John got a call assuring him that the funds would be transferred as soon as they received a “processing fee” of $900. This was a bit of shock for John, but he delivered the check. He could hardly sleep that night, and he called back first thing the next morning. There was no answer. He drove by the loan office. It was vacant. They had vanished without a trace.
Requirements
1. Did John have reason to be suspicious? What were the warning signs?
2. What should small businesses do when they are in financial trouble?