First off, I would be remiss if I didn't point out the obvious to anyone reading this now: The best way to avoid a lending scam is to call me with all your funding needs ;)
"Many Merchant Cash Advance(MCA) sales reps encounter business owners who have been so defeated by scams, that they are skeptical when something legitimate actually comes along."
There are too many schemes to cover in this short note however, there are some which I've seen frequently and have dealt with regularly so I'll speak about those.
* The most common is the "bait & switch" - The merchant is told their business has been approved for a large Line of Credit (LOC) or SBA Loan like $500,000 but first, in order to "fully qualify" they must agree to a much shorter term cash advance with horrible terms. This, they claim , is to "prove" their credit-worthiness to the lender and finalize the larger approval. What happens in reality is the merchant pays off the 10-20 day, horribly overpriced advance and the LOC never materializes. Unfortunately this scam has cost many business owners dearly.
* The other most common trick I call "Manna from heaven" - The merchant is declined for an advance because of some formality or perhaps low fico score,then, Immediately a call comes in telling the merchant the good news: "I managed to get you approved for a lower amount but the terms are very poor, the lender says do this (really horrible) deal and I'll re-new to upgraded terms in 30 days". Of course that never happens and the merchant is stuck paying the (much) higher priced advance till expiration.
Clearly, a business owners best defense is common sense; if your business has been approved for a lending product with excellent terms, you shouldn't be required to take one with crappy terms first :[
Also, for any business who has been either declined or otherwise not received a satisfactory enough offer, there are plenty of options in the Alternative Lending universe. The scam artists and predatory lenders who prey on small business owners are a fact of life and need to be understood for what they are and avoided at all costs.
Fortunately enough, small business owners are a hardy breed and have had to endure their fair share of predators so a few amateur con artists won't stop them!