What is the goal of asset-based loan fraud?

The goal of asset-based loan fraud centers around creating a falsely inflated perception of a borrower's financial condition in order to secure funding. In this context, "cooking the books" refers to unethical or illegal accounting practices that make a company's financial situation appear stronger than it actually is. Borrowers may manipulate financial statements, overstate assets, or create fictitious invoices to deceive lenders, aiming to obtain loans that would not be approved based on accurate financial information. Hence, this fraudulent approach seeks to exploit the trust of lenders by presenting misleading information that suggests the borrower has the ability to repay the loan while, in reality, they are not financially sound.

In contrast, securing loans against legitimate invoices typically aligns with lawful lending practices. Providing accurate financial documentation to the lender is essential in establishing trust and transparency, thus facilitating legitimate business transactions. Attaining funding with minimal risk would pertain to both lenders and borrowers adhering to ethical standards; however, in the case of fraud, the goal is inherently to mitigate risk for the borrower by illegitimately securing a loan based on falsified information.