Sometimes, the only difference between a successful business and one that flounders and eventually fails is the scale of investment that the company secures. If you have a great idea and the intention to turn that concept into a reality, you may need investment from individuals, banks, other businesses or even stockholders in order to turn your dream into a functional and profitable business.
It is only natural to talk up your own abilities and the prospects for your business as a means of enticing potential investors to make a financial commitment to your idea. However, if you misrepresent yourself, the business or the resources you already have, you could eventually wind up accused of fraud because of your enthusiastic exaggeration.
Misrepresenting your business, its finances and other factors is fraud
While implying that someone has already made a large financial investment with your business might incentivize others to follow suit, you put yourself in a dangerous position when you misrepresent the circumstances around your company in order to secure capital. After all, people can’t make informed decisions about how to invest if you don’t provide accurate information.
If your idea is truly strong, investors should be able to recognize the potential for profit regardless of the limitations that you currently have. If you have to lie to someone by exaggerating about your success, promising returns you know aren’t possible or misleading them about the scope of the company, then they probably aren’t the right investor for you anyway.
If you push someone into an investment by misrepresenting material facts, they may eventually claim to be victims of fraud because of those exaggerations or misrepresentation, especially if they lose money. Fraud allegations could lead to lawsuits and also to criminal charges.
Fraud allegations can permanently end your business plans
Most private investors and certainly all financial institutions carefully vet investments before they make them. Usually, that process involves looking into the company itself and any high-ranking people in the business.
If you wind up charged and convicted of a white-collar criminal offense involving fraud, people and companies that might otherwise partner with you will become skeptical about your sincerity and your character. Defending yourself against any allegations of misrepresentation or fraud will be of the utmost importance to your continued career advancement and business success.