As an entrepreneur, you are inventive and energetic, capitalizing on a solid business plan and an opening in a particular industry or field. As an entrepreneur, you are also vulnerable. Investment fraud is a very real possibility that every entrepreneur must face. There are fraudulent people, posing as legitimate investors, and they often prey on an entrepreneur’s fund-raising efforts. This is a time when you’re most vulnerable, and it doesn’t matter what site you’re on, someone is willing to prey on you.

But small and start-up businesses still require funding. Without help from private investors and venture capital firms, it can be very difficult for an entrepreneur to get his or her business plan off the ground. So how can you be sure the investor you are dealing with is all he or she claims to be?

The following tips serve as a guide for entrepreneurs and small business owners to help them make smart business investments. Keep in mind; these tips are merely guides to help reveal potential danger. There is a possibility legitimate investors may or may not follow some of these practices. However, when it is your business plan and your investment, it is better to be safe than sorry. With the following tips, you can better prepare yourself to avoid future situations of fraud.

1.) Don’t Make Investments Based on Appearance Alone –

Although first impressions are usually strong and lasting, they should not be the deciding factor when selecting a private investor or investment group. Just because an individual or company has a flashy web site doesn’t mean it is legitimate. Web sites can be created in just a few days. After a short period of taking money, a site can vanish without a trace. Don’t judge a person/company by their web site. Look for other signs of legitimacy for their investment group or network.

2.) Do Your Homework – Perform Solid Investment Research! –

One of the reasons investment fraud exists is because entrepreneurs and business owners aren’t always careful. Of course, you are busy and overwhelmed. But choosing an investment group for your business is no time for shortcuts. Don’t invest in anything you are not absolutely sure about. Do your homework on the investment to ensure that it is legitimate. Do your homework on the individual or company to ensure that they are legitimate.

3.) Research, Research, Research! –

Check out other web sites regarding this person/company. If this business plan is your dream or company, you owe it to yourself, to do the due diligence of really digging deep. If you care, the deal can wait a week until you find out how valid they are.

4.) Be Cautious of Special Investment Opportunities –

Be cautious when responding to special investment opportunities or offers (especially through unsolicited e-mail). Inquire about all the terms and conditions before agreeing to anything. Ask about every detail, and get every official paper they have. If they’re willing to fund you, they should be willing to go the extra mile for your sound mind.

5.) Beware of Foreign Business Funding Opportunities –

Most entrepreneurs and small business owners have heard of the notorious Nigerian 419 Scam. Foreign investment scams and fraud are often sophisticated and difficult to track. Beware of any international “firm” which requires a “fee” to be sent through a wire transfer to a foreign bank. The FBI warns against this and other similar scams. There is little the U.S. federal government can do for businesses that succumb to these foreign funding scams.

Following these tips is not a surefire way to prevent investment fraud from infiltrating your business plan. Fraudulent investments are able to exist for a reason – they are resourceful, clever and dedicated to deceiving hard-working entrepreneurs when they are at their most vulnerable. What this guide can do is offer you the best possible chance to spot these frauds and give your business plan the best possible chance for success.

Nathan B. Weller is a writer and producer, having produced more than 500 projects ranging from televised commercials, TV series, and live events touring the country. At GoBigNetwork, Nathan develops partner relationships with reputable companies, helping GoBigNetwork connect startups with private investors willing to provide small business funding.

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