Magazine article Business Credit

Change in Ownership

Magazine article Business Credit

Change in Ownership

Article excerpt

Changes in ownership occur every day, and the vast majority are completely legitimate. However, there are many individuals who specialize in buying businesses with the sole intention of driving them into insolvency, keeping the assets for themselves and leaving creditors in the lurch.

This form of business credit fraud causes greater losses than all other forms of credit fraud put together. How can you tell the difference between legitimate ownership changes and questionable ones? There are several key warning signs.

One warning sign is a new owner with a track record of bankrupting businesses. Unfortunately, most are not so obvious.

A second warning sign is an ownership change with little or no notice given to creditors. In most instances, suppliers (trade creditors) and others associated with the business are notified of an ownership change. But credit fraud operators often like to capitalize on the good name of the business, and downplay the new ownership.

Another indication that something might be wrong is a new owner with little or no background information available. Often, fraud operators (also called "take-down" artists) take over businesses through "fronts". The real owner (or takedown operator) has such a bad track record, that his or her name cannot appear on a business without raising suspicions. The object is to find a "clean" front man. In this case, you might see a new owner of a business whose prior business experience seems insufficient to have provided either the capital or the experience to purchase and operate the business in question. …

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