Advance-fee fraud
The oldest and most common. You are approved for a large facility, subject to an upfront payment - an 'insurance premium', a 'first payment in good faith', a 'processing fee', a 'lock-in deposit'. You pay it and either nothing arrives or another fee is required.
The rule is close to absolute: legitimate lenders deduct their fees from the funded amount or collect them at closing through an attorney or title company. They do not ask a borrower to wire money to receive a loan. Any request for payment by gift card, cryptocurrency, or wire to an individual is fraud, without exception.
Fake and 'guaranteed' grants
The SBA does not make general-purpose grants to start or grow a business. No federal agency charges a fee to apply for a grant. Any unsolicited message announcing you have been awarded a grant you never applied for is fraud.
The subtler version charges a real fee for 'grant matching' against a list of opportunities freely searchable on Grants.gov. That is not fraud, exactly, but it is rarely worth paying for.
Lead resale
You fill in one form on a comparison site and receive twenty calls in three days from brokers you have never heard of. Your application was sold, sometimes several times over, and every recipient now holds your revenue figures and your phone number.
You can spot it by the site asking for a phone number before showing you anything useful. This is the single largest reason we built this site without any form at all: what we never collect cannot be resold.
Impersonation of real institutions
Fraudsters use the names of real lenders, real SBA programmes, and occasionally real employees. Verify independently: look up the lender's phone number yourself rather than calling the number in the email, and check the domain of any email address carefully. SBA-related communications will come from a .gov address.
A short verification checklist
Search the company name alongside 'complaint' and 'lawsuit'. Check whether the entity is registered in the state it claims to operate from. In the roughly ten states that license commercial loan brokers, ask for the licence number and verify it with the regulator. Ask for the total repayment amount in writing - fraudsters avoid written specifics.
And be more suspicious of an approval that arrives without underwriting than of a decline. No legitimate lender approves a business loan without looking at financials.
Questions
- Does the SBA give grants to start a business?
- No. The SBA guarantees loans and funds intermediaries and counselling. It does not make general grants for starting or expanding a business. Anyone claiming otherwise is either misinformed or lying.
- I paid an upfront fee and the loan never came. What now?
- Report it to the FTC at ReportFraud.ftc.gov, to your state attorney general, and to your bank immediately - a wire can occasionally be recalled if reported within hours. If a real institution's name was used, tell them too.