Private lending and sensitive information

[Brant Schumaker]

I am researching private lending options for my business and the thought dawned on me that these types of transactions are typically individual to individual. What sort of due diligence can/should I do on the lender to ensure that my private information (SS#, financials, etc) will he kept secure and that I won’t have an identity thief posing as a lender?

[Jeff S.]

First, foremost, and above all, @Brant Schumaker, is to know who you are dealing with. You asked a good question.

The one obvious question, which few borrowers ever ask is, “What personal information will you require from me and how will you protect it.”  Many online scammers will give you an instant approval with almost no information required from you. All they want is an up-front fee so they can disappear. This should be a red flag to you. Some scammers know they can also sell your info. The bottom line is to know who you are dealing with.

Lending is a business based on relationships, not online anonymity. Stay off the web when trying to find money. Local real estate clubs are your best bet; face-to-face. Under normal times, you’d be hard pressed to toss a stone into any real estate club and not hit a private lender. You would go to lunch, bring a list of informed questions, and develop a relationship. There is almost never a reason to do business with an online stranger.

Until we can socialize again, your best bet is to go to Meetup.com and call some local real estate club operators. Ask which lenders regularly attend their club and who have the best reputations. Call these people and have a conversation with that same list of questions. Never rely on anonymous strangers you met on the web to find your money.