Fraud tiles

Business Owners - 11 Ways to Prevent Fake Credit Applications

At Freightlink, we are very aware of the threat of credit application fraud and the problems it can cause. Likewise, we realise that it is very important to our business owning customers that it can be prevented. Here are eleven ways to prevent fake credit applications -

1. Ascertain that you have the 8 digit registration number of the applicant company

A company can change its name as many times as it wants but it CANNOT change its registration number.

2. If the Application for Credit has been received by email, have a look at the email domain address that has been used and then have a careful look at the one on the website (if there is one) of the applicant company to see if it is the same.

Fraudsters are known to be making bogus applications for credit using email domain addresses which are almost identical (cyrillic letters are commonly used). This is very difficult to spot so check carefully.

3. Get a landline number from the applicant company and then ‘Google’ it.

You never know what information such a search might reveal.

4. Have a look at the website of the applicant company. Ask yourself if the information on the website roughly match any financial information you already have.

Many websites naturally give a glowing picture about the business. However, fraudsters who view websites as a really useful tool, can ‘over egg the pudding’ and fantastical claims should put you on guard.

5. Consider having a look at the address of the applicant company on ‘Google Maps’.

A visual location of where the applicant company allegedly trades from can help you form a clearer opinion about the applicant business.

6. Credit check the company with whatever credit reference agency you use.

Hopefully your credit reference agency will show you the value of the company over a 3 to 5 year period so that you can see its ‘direction of travel’ – be more cautious if there is a downward trend.

7. Obtain a copy of the last filed accounts to see if there is any useful information about the company (such as a Profit & Loss Account, Balance Sheet, details on directors remuneration, dividends that have been paid and related party transactions) upon which to gauge the risk and which factors might not have been taken into consideration by the credit reference agency you use. You may be surprised – some credit reference agencies given ‘rotten ratings’ on companies that are very creditworthy and you don’t want to miss the opportunity of trading with such entities by entirely relying on the opinion of one source.

Accounts can be obtained for free and very easily from Companies House.

8. If the accounts look very good and do not appear to have been prepared by a firm of accountants, ask yourself if they look ‘too good to be true’ and are possibly bogus.

Fraudsters commit what is known as ‘short firm fraud’ using bogus accounts and credit reference agencies rarely spot the issue before it is too late.

9. Always ask for 2 trade references and make sure they are followed up.

Look to see if the references are from ‘connected parties’. If the referee states that it has traded with the applicant company for say 5 years but the applicant company was only formed 2 years ago, be wary. Ask yourself if there was a previous company and, if so, what happened to it.

10. If your credit reference agency facility has the function see what other appointments the directors of the applicant company have, take a look.

Any mentions of previous businesses, multiple failed companies or other companies with similar names should make you wary.

11. For ‘less than stellar’ potential new customers, request payment upfront on first shipments via bank transfer. Not card or cheque.

Card payments can be queried by the account holder and transactions can be reversed, sometimes weeks or even months later.

17 October 2019

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