I recently talked to a business owner who was in the process of raising capital. To this end, she paid a $20,000 upfront fee to a finder (a person who brokers equity investments and loans).
The result? Nothing. The finder said that a variety of banks were not interested in the deal.
Oh, and that $20,000 fee? Unfortunately, that was non-refundable.
With the credit crunch -- and slowing economy -- entrepreneurs are certainly having trouble raising money. But, there also appears to be a rise in so-called "advance fee schemes" (this is according to a recent piece in the Wall Street Journal, which is a paid publication).
In fact, the FBI is investigating the matter (and also has some helpful resources on its website). Although it could actually be pretty tough to prove fraud. Essentially, there must be evidence that the finder had no intention of raising the capital.
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