Corporate Credit Scam?

Question

Hey guys!
I met someone recently who says that she lets others use her companies line of credit in exchange for cash. For example, she said that if someone pays her 10K she would absorb your company into hers and allow you to establish a 100K line of credit (using her companies tax history).

Is this a scam or illegal? Thanks in advance

Scott Hubbard · Answer

What do you mean absorb?  If you refer to a merger or an actual sale, then you might lose controlling interest in your company.  I assume this is the case, becuase in order to use her companies tax history, your company must become hers in essence.

Another risk is what guarantee does she make that you will have use of the $100k line indefinetly.  LOC's get reviewed every six months or so and if something substantially changes, like a merger, then they may cause a freeze on access to the funding pending a review.

Lastly, this sounds very sketchy because she is asking you to pay her for access to a credit line of which she does not likely have rights assigning an interest.  This, at the very least is a  violation of her loan agreement, or could also be construed as fraud as she is probably not registered and chartered as a bank.

I would suggest you do some careful due diligence before proceceding.  Ask her for the names and numbers of other businesses whom she has had a prior arranement with.

Also check with the attorney general to see if there has been any complaints filed.

Lastly, check with the creit institution providing her with the line of credit to make sure she is in good standing.

These are just a few of the places I would start looking just to make sure she is legitimate before preceeding with any formal arrangements.