Identity Theft Can Devastate YOUR Business

Identity Theft Can Devastate YOUR Business
By Yan Ross ©2004 - All Rights Reserved

This is the second in a series on the impact of Identity Theft on Businesses and Business Owners.

"For all SBA loans, personal guarantees are required of every 20 percent or greater owner, plus other individuals who hold key management positions."

"Financing Your Business" by the U. S. Small Business Administration

We've all heard of the problem, we've all seen the ads, but few have recognized how the theft of the identity of an owner or key manager can wreck your entire business.

Your business, like nearly every enterprise, depends on credit facilities to assure smooth cash flow. And it's a 98% probability that your business loan is backed up by the personal guarantees of you, your family, and even your key partners and executives.

But have you thought about how your vulnerability to identity theft could cost more than just a runaway credit card balance or a frozen bank account -- how it could cost you your business?

The identity theft victim's creditworthiness, and consequently the ability to make business loan payments in a timely manner, can be adversely affected.

If the lending bank "deems itself insecure," the loan may be accelerated. What if the bank can no longer be sure whose credit or guarantee is one the line? If your credit lines were suddenly called, would you have the cash to simply pay them off?

What impacts of identity theft that can result in this situation? The following examples are illustrative, not exhaustive.

  • Lost work time and earnings -- according to the FTC, the average victim of identity theft spends 200-600 hours in restoring his or her identity.
  • Adverse impact on cash position -- again, the FTC reports that the average out-of-pocket cost to the identity theft victim is about $1500, money that would otherwise be available for debt service and other obligations.
  • Approximately 12% of identity theft victims [1 in 8] spend time clearing their names of reported criminal activity carried out using their names and Social Security numbers; it may even lead to arrest and imprisonment.
  • Inability to get a clean audit and accurate credit report to support other financial needs, such as liquidity for a small business owned by the borrower; other lenders may deem themselves insecure and cause a cross-default situation
  • Adverse action by the IRS based on employment being gained by another individual using the business owner's name and Social Security number; typically, the other individual is a felon or otherwise unable to gain employment; the bogus W-2 is issued in the name of the victim, causing tax payment deficiencies.
  • General disruption of the business owner's ability to generate the income to make timely loan payments.

Consider securing your owners and key executives the protection of a comprehensive plan that provides:

  • Access to credit reports for owner/employee and spouse
  • Continuous electronic monitoring and immediate notification of any attempts to perpetrate this crime,
  • A licensed private investigator to restore the victim's true identity, and
  • Pro-active searches of applicable local and national databases to look for information you may not be aware of.

About the Author:


Mr. Ross is a frequent lecturer and quoted authority on identity theft issues. His recent presentations on these related subjects include such sponsoring organizations as Arizona State University College of Extended Education, the Arizona Society of CPAs, and the Arizona Small Business Association.

In Mr. Ross's capacity as an independent associate of Prepaid Legal Services, Inc. [NYSE symbol PPD], he markets the Identity Theft Shield product provided by Kroll Worldwide, the nationally and internationally prominent security and investigative firm. Additional information and enrollment capability can be accessed at

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