What does asset-based or working capital loan fraud typically involve?

Asset-based or working capital loan fraud often involves creating false invoices to inflate perceived financial health. This type of fraud typically seeks to deceive lenders about the borrower’s financial status. By generating fake invoices, a borrower can present an inflated view of their revenues and receivables. This can lead lenders to approve loans that would not have been granted if the actual financial condition of the business were known.

In this context, the fraudulent activity specifically aims to manipulate financial information to secure funding under false pretenses. While leveraging actual receivables or providing accurate financial statements would work within the realm of legitimate borrowing, the essence of asset-based loan fraud centers on the creation of deceitful documents to misrepresent real financial conditions. Thus, the correct answer highlights a common tactic employed in this type of financial crime.