The Truths and Myths about Advance Fees

advance feesAdvance fees in business English are monies that you pay to a person or company before receiving something.

Advance fees are greatly misunderstood. It’s important to understand that the majority of people refusing or objecting to paying advance fees, particularly in the area of acquiring corporate finance, are people with something to hide.

Advance fees are known by other names. Attorneys and accountants call them ‘retainers’. Many ATMs charge you a cash advance fee of $3 when you take money out of the machine. The entire insurance sector is nothing but advance fees. You’re paying in advance for something you hope will not happen.

Charging advance fees is not a scam. Refusing to pay them is. Expecting someone to work on your behalf on the belief they will get paid when the work is done is as ludicrous as asking a loan broker to guarantee he will get you funded. This is the oldest trick in the book, the biggest scam of all.

Here at The Web Lender we charge a service fee, payable in advance of us commencing work and for good reason. Clients offering to pay service fees upon completion of us securing funds for them defeats its own purpose, since we are seeking commitment from clients ahead of us spending time, effort and resources on their project. The Web Lender is not in the business of taking on client risk.

Many stories you read on social media about people who paid advance fees and never received the service they paid for are not true. These stories are pure fiction, written by angry people who didn’t get what they wanted.

The argument that paying advance fees is a scam revolves around promises. Anyone promising something in return of you paying advance fees is the scam. The promise is the scam not the payment.

Individuals and businesses pay fees for a wide variety of reasons. An individual may pay a financial advisor a fee for helping choose and manage investments, and a family may pay a fee to a real estate broker when selling a home. A business may pay a fee to an accountant to help manage its books, and to a security company to make sure that the building is protected after work hours.

Fees charged by banks are less likely to be transactional in the sense that the account holder has not requested a service. In some cases, as when an account is overdrawn or a credit card payment is made late, a fee is charged as a penalty. In other cases, such as when a bank charges a monthly fee to checking account holders, the fee has little to do with the cost of maintaining the accounts.

Corporations seeking business finance who refuse to pay some form of advance fees rarely if ever receive funding. The majority of them won’t pay because they know they are not fundable, have no faith in their own project, or express ignorance of the funding process by asking for a guarantee.

Funding any project is based on two elements. Truth and facts. When everything a borrower claims to be truthful is proven truthful and all the facts he presents are proven factual, funding is achieved. Omitting something which a borrower feels irrelevant or making false or unprovable claims is cause for immediate disqualification.

It is common practice within the financial services sector to charge a fee in advance for a service. Just be careful to not conduct your business with anyone offering a promise.

Again, The Web Lender is not in the business of accumulating or transferring risk. We have been misled by clients in the past for whom we have found funding but unknown factors and material events have later been introduced by the client thus exposing ourselves to reputational risk with funders. We have observed that it is prudent for us to take on board clients who believe in their projects such that they are willing to be invested with us.

 


 

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