Rise in small business loan fraud attributed to pandemic

Credit fraud among small to medium-sized businesses has increased by 6.9% since 2020. More than a third of the growth in credit fraud against small and medium-sized businesses is attributed to the pandemic.

These were some of the key findings from LexisNexis Risk Solutions’ Small and Midsize Business (SMB) Lending Fraud Study.

Rise in small business loan fraud attributed to pandemic

The research provides small businesses with important insights into the escalating fraud trends in the wake of the pandemic, and how hackers and cybercriminals are becoming more sophisticated in their methods.

In light of the findings of the study, companies must be transparent, fair and prudent when applying for business loans to ensure accuracy and transparency with financing.

Fraud evolves

Tom Hunt, director of business risk strategy at LexisNexis Risk Solutions, commented on the survey, saying, “The digital channel environment is upon us and continues to grow as customers and prospects expect digital lending options, especially in times when face-to-face transactions are more challenging.

“At the same time, fraud is evolving and it has become more complex for lenders. Several risks can occur at the same time and there is no single solution to solve them all. To be effective, fraud tools now need to authenticate both digital and physical criteria, along with identity and transaction risk.”

Labour-oriented expenditure increased

The survey found that fraud prevention costs related to labor have been increasing since 2020. As a result of the Paycheck Protection Program, lending has seen increased loan applications and fraud involving false business references and false or stolen identities when applying for business loans.

Increase in mobile channels

The research shows how online and mobile channels still represent the bulk of credit transactions. Subsequently, fraud with credit applications via mobile channels has increased by as much as 10%, especially at fintechs and larger banks.

Layered solutions reduce costs

Another key finding from LexisNexis Risk Solutions’ Small and Midsize Business (SMB) Lending Fraud study is that lenders who combine more sophisticated identity authentication with advanced transaction/identity verification solutions generally experience less fraud. Layered solutions meant that the pandemic had less fraud impact on these institutions.

The COVID-19 pandemic has forced many lenders to make changes to their fraud detection and mitigation approaches. Small businesses applying for loans should be aware of the increase in loan fraud among SMEs and should apply carefully and transparently to avoid problems and application delays.

Image: Depositphotos


This post Rise in small business loan fraud attributed to pandemic was original published at “https://smallbiztrends.com/2022/03/rise-in-small-business-ppp-loan-fraud-covid-pandemic.html”

Leave a Reply

Your email address will not be published.