In the business world there are unfortunately a number of people who want to do nothing more than get the “easy” paycheck. For them, this means giving up their morals and ethics to grab a few extra bucks from an unsuspecting victim.
While not every “scam” out there is “wrong,” most of these types of scams can pass as a legitimate business strategy to someone who isn’t aware. They often straddle the line between “right” and “wrong.”
Regardless of whether or not it’s allowed, you as a business owner need to be able to watch for strategies that other financing companies are putting out there to try and capture a sale from you. This is especially important in the world of construction equipment financing.
Let’s explore ten major construction equipment financing scams that you should keep an eye out for.
1.) The Classic “Bait and Switch”
We’ve all seen it before. An “unbeatable” promise given to you by a construction equipment financing company. You get excited, click on it, apply for the rates and … when you finally get a proper offer, it’s way different than what you clicked on.
Suspicious? Very. This is a “strategy” that many construction equipment financing companies will use to get your attention and hope that you won’t notice the change in rate as you sign on the dotted line.
2.) Equipment Leasing Calculators
In some cases, an equipment leasing calculator can actually be useful. But you should never base your entire financing decision on the calculator alone.
Think of construction equipment financing calculators as an “estimate” for what you might be able to get with a lease in an ideal situation.
But here’s the thing to keep in mind: these calculators can be programmed on the back-end to provide rates for someone who has “great” or even near perfect credit ratings. Most business owners seeking construction equipment financing don’t have a perfect credit score, which means that the “rate” you’re estimating through a calculator is not likely one you’ll actually get.
3.) Deliberate Changes to the Contract
Some dishonest financiers aren’t shy about making deliberate changes to your contract in the middle of negotiations. They’re willing to prey on unsuspecting business owners, which is why it’s so important to review EVERY version of a contract that’s sent to you.
A change to the document could happen anywhere, but such a “small change” could result in a lot of money being lost unnecessarily.
For example, you may think you're signing a contract where you own the equipment at the end for $1. The construction leasing company will change the buy out of the contract to an FMV. So always make sure you know what happens at the end of your agreement and make sure it's in the contract and not changed during a revision to the equipment leasing contract.
4.) Advanced “Fees”
If you’re new to construction equipment financing, it might not seem like a big deal that you have to pay a fee to “file your application.” After all, you need the financing for your equipment so you’d better get approved for it.
Well, not only can these fees run very expensive - in the thousands! - but if you don’t get approved, they just keep the application/advance fee money.
It’s not uncommon within the equipment financing industry to ask you to prepay on document fees (in the hundreds, but definitely not in the thousands) before committing you to an underwriter.
If the company is legit and isn’t trying to scam you, they won’t keep that money if they can get you a deal for your equipment. If this happens to you. Threaten the construction equipment leasing company with contacting rippoffreport.com, writing a bad review on the better business bureau, writing a bad review on google reviews, contact their states department of business overview to file a claim. If you wired them the money than it can be considered wire fraud and you can contact their states attorney general to file a claim. Either way I would file a claim with them. If all the above doesn't help, Consider hiring a lawyer to contact the construction equipment leasing companies owner/president to put pressure on them to return the money.
5.) Evergreen Clauses
One of the sleaziest things to do in financing is an “evergreen clause,” where the financing company has the “right” to extend or renew your contract for another 6-12 months if you don’t notify THEM about the contract nearing its expiration.
In other words, you’ll pay far more than you originally agreed to.
Unfortunately, these kind of evergreen clauses are legal in almost every single state in the U.S.
If you sign up for an a lease that has an FMV buy out, make sure to find out if the contract has an evergreen clause in it. If it does be sure to send in a certified letter and email to the leasing company ASAP to notify them what your intentions are for the end of the lease.
6.) Contract Changes AFTER You Signed
If you ever catch someone changing your contract AFTER you’ve signed it is a massive red flag. This means that your construction equipment financing company has no shame in essentially cheating you out of an agreement you both made. Do everything you can to get out of the agreement and cut ties with the organization.
7.) Companies with NO Reviews
Every reputable business out there has some kind of review about their business. The only exception is “new businesses,” but they’ll get reviews in due time. If a company mysteriously has no reviews or if 100% of their many reviews are suspiciously perfect, then it might be a warning sign that the company may be putting out false reviews or testimonials.
It’s worth doing a little extra digging to make sure that each company is legit. There are plenty of review sites out there that you can find simply by Googling the company and adding “reviews” or “testimonials” to the search. Make sure to take in each review with a grain of salt because there are always two sides to every story.
8.) Lying about your contruction equipment financing rate
Similar to the “Bait and Switch,” you’ll be promised a low rate, you’ll sign, you’ll get your equipment … only to figure out you didn't get the rate the equipment financing expert promised you. It's best practice to consult with a banker, CPA, or someone that knows how to calculate your equipment leasing rate.
9.) Companies That Don’t Actually Know What They’re Talking About
While it’s not necessarily a “scam,” some companies will try to make a few extra bucks in the construction equipment financing industry by trying to mirror other businesses in the industry. If a company doesn’t have high quality content on their website or a considerable portion of their information is blatantly wrong, then steer clear.
10.) Promising Great Rates Before Asking for Your Credit Score and credit history
Your credit score makes a big difference in construction equipment financing. If an equipment financing company doesn’t ask for it and still manages to promise unbeatable rates, it’s typically a sign that they’re already planning on trying to scam you out of your money. Make sure to know what your credit score is before shopping around for construction equipment financing and stay away from companies that don’t ask for your credit score when calculating your rates. An experienced equipment financing expert will ask additional questions about your credit history before calculating equipment financing rates for you.
If you ever see these kinds of behaviors from construction equipment financing companies, you want to simply turn and walk away. If a company is doing something sketchy at the beginning, it’s likely their behavior will persist throughout the entire construction equipment financing process.
Make sure to do your research because unfortunately there are sharks out there in the equipment financing world. Contact us today to learn more about construction equipment financing and we’ll help you understand the ins and outs of financing your construction equipment.