VC Secrets: Scams and Shams- Take the Money?

Dear ,

As promised, here is your new issue of the Expert-zine.

VC Secrets: Scams and Shams

  ** When shouldn't you take the money? **

By William F. (Bill) McCready
Founder/CEO Venture Planning Associates, Inc.

Opportunities for unscrupulous companies to offer money at
seemingly amazing low rates are at an all time high. 

If your the bank won't lend it to you, and local investors
won't give it a second look, ask yourself this question
before you commit to anything. 'Why would someone from out
of state or out of the country even consider investing in
my small startup company, when no one else will even consider
it?' 

Here are a few of the scams, shams and flimflams encountered
by entrepreneurs over the last twenty years. You can check
some of the latest ones out by visiting the Securities and 
Exchange Commission,
http://www.sec.gov/investor/online/scams.htm

SECRET FOREIGN INVESTORS

Usually a group from an economic hot spot that wants to get
its money out of an unstable country. Any time you cannot
contact the source directly, be wary. It could be drug money
or government corruption money looking for a way to be
laundered, and an up front finder's fee is usually demanded.

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NIGERIAN LOVE LETTERS

A Nigerian national, often a General or petroleum executive
'has discovered an unprocessed or underpaid invoice for
$20+ million'. The 'General' will want to deposit these funds
outside the country into your bank account, and you will
receive a 10 %- 30% commission. The catch: They will drain your
account as soon as you give them the transit codes, and you 
will have no recourse.

OFFSHORE COMPANIES

'Offshore', or tax haven, companies are often legitimately
maintained in order to shield international assets from
excessive foreign taxes on worldwide assets. U.S. Citizens must
still declare ownership of assets, and will be taxed on those
assets. Because it is not always possible to determine actual
ownership, these companies are often fronts for drug money or
other 'not-so-clean' money sources looking for a legitimate
enterprise in which to invest.

100% STARTUP LOANS

100% startup loan programs and loan guarantee programs are just
another up front fee scam. In the U.S., Legitimate banks do not
make startup loans or loan guarantees, and are prevented by 
certain federal laws from taking excessive risks. If a company
meets certain debt to equity ratios, and the principals have
adequate collateral, personal guarantees, or an SBA guarantee,
then a loan equal to 30% or less of the capitalization may be
possible.

CASH ONLY INVESTORS

Cash Only Investors should be a tip off to a money laundering
scheme. Federal banking laws require depositors to declare
where more than $10,000 in cash comes from, and the banks are
obligated to report the same to the IRS. Under U.S. Law, the
company and any affiliated assets may be confiscated if the
money is determined to be from illegal activities.

SUMMARY

Know the source of funds. Do not accept money from strangers,
and never ever pay large up front fees for any funding source
or finder. Remember, if it sounds to good to be true, it
probably is!

Be sure to do your due diligence on all sources before
agreeing to accept funding. Have your attorney, CPA, or banker 
assist you.

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Watch for the next issue!
___________________________________________________________

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Teri McCready, Publisher  
Tel. (858) 457.3434 / email: marketing@ventureplan.com

5370 Toscana Way                 San Diego, CA 92122 USA

Copyright 2000-2002, Venture Planning Associates, Inc.
ISSN: 1529-1316
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         Bill McCready, CEO/Founder
         Venture Planning Associates, Inc.





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Received on Sunday, 26 October 2003 02:12:51 UTC