Not long ago, a small business owner I work with found herself the target of an identity thief. He didn’t open credit lines in the name of the business, but instead stole its name and good reputation to bilk other entrepreneurs out of thousands of dollars. He was quite blatant about it, even representing himself on LinkedIn as a principal of the business.
Dealing with identity theft is bad enough, but if it hits your business it can be devastating. It can take enormous resources and time to straighten out — and what entrepreneur has lots of time to spare? It can even bring your business to a screeching halt if you don’t catch it and stop it quickly.
Here are three reasons identity thieves love small business owners.
1. It’s Easier to Get Info
There are strict limits on who can review personal credit reports or scores, but the same limits do not apply to small business credit reports or scores. (That’s true as long as they don’t contain personal credit information about the owner — some do — and those are subject to restrictions).
“Because it’s not covered by Fair Credit Reporting Act protections, anyone can check a business’s credit report and get sufficient information (EIN, address, employees and principal owners’ details, etc.) to start the ID theft process,” says Caton Hanson, co-founder of Creditera. “Personal information is more difficult to obtain and requires nefarious means to do so,”
In addition, there are many more points of access to sensitive information. If you’ve been watching the series “Mr. Robot,” you know that the main character Elliott Anderson finds “phishing” — simply asking the right questions — to be an easy way to get into other people’s email or social media accounts. Similarly, in a small (or large) company sometimes all it takes is one employee with a weak password or a lack of skepticism to open the door to criminal activity.
2. It Can Be Lucrative
An established small business may have larger credit lines and larger bank accounts, both of which make them more attractive to a scammer. Why not steal $50,000 if it takes the same amount of work as stealing $5,000? In addition, small businesses may have a history of larger transactions so, for example, a large wire transfer overseas doesn’t set off alarm bells the way it might on an individual’s account.
3. It’s Harder to Detect
Small business owners are often surprised to learn there are many business credit reporting agencies they’ve never heard of before. There are a variety of credit reporting agencies that report small business credit information — and many specialized agencies that most entrepreneurs haven’t heard of. (I provide details on the various business credit bureaus in my new book Finance Your Own Business.)
And because some vendors and creditors don’t report business credit activity at all, it could be months before you realize you’ve been a victim. I learned of one business that was a victim, and the impostors rented office space in the same building where the actual business was located to pull off their scheme!
You’ve Been Warned
The steps for protecting yourself from business identity theft will likely sound very similar to those that are used to protect yourself from personal identity theft. They include:
- Shredding all sensitive documents.
- Using very strong passwords and changing them regularly.
- Limiting access to sensitive information by employees on a need-to-know basis.
- Keeping track of your credit. Companies such as Experian, DNB and Creditera offer business credit monitoring.
- Making sure employees with access to sensitive information secure laptops, cellphones and all data related to your business.
- Hire a company to provide business identity theft protection. We explored the options and recommend our affiliate iDefend Business.
There are many challenges when running a small business. There are a number of obstacles to overcome. Identity theft is a continuing challenge for small business owners. Put up your own road blocks and defenses to make sure you are not the next victim.
To learn more about the services small businesses can purchase to protect themselfs from fraud visit iDefend Business.
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About the Authors
Garrett Sutton, Esq., author of Start Your own Corporation, Run Your Own Corporation, Loopholes of Real Estate, The ABC’s of Getting Out of Debt, Writing Winning Business Plans and Buying and Selling a Business in the Rich Dad Advisors series, is an attorney with over twenty-five years experience in assisting individuals and businesses to determine their appropriate corporate structure, limit their liability, protect their assets and advance their financial, personal and credit success goals.
Gerri Detweiler is the author of four books, including the Ultimate Credit Handbook (named one of the top five personal finance books of the year when it was released), and a media favorite quoted in publications like USA Today, The Wall Street Journal and featured on The Today Show and CNN. A credit educator since 1987, she’s served on credit reporting agency Experian’s Consumer Advisory Council twice.