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How to avoid business loan scams

Don't fall victim. Know the warning signs and sneaky tactics to watch out for.

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Business loans are essential for many businesses, but business lending is also a hotbed for scams. Scammers work from both inside and outside of the US to separate business owners from their money by taking advantage of people who don’t know how the process works or what to expect.

Fortunately, you can stay safe by learning about what to look out for and some of the tricks often used by scammers.

Think you’ve encountered a scammer?

If you’re dealing with an unscrupulous company who’s trying to get your money, it’s important to stop dealing with the lender or scammer immediately. You should report the scam to the Federal Trade Commission and Better Business Bureau and then file a report with the police.

Coronavirus business loan scams to watch out for

The Small Business Administration (SBA) warns small business owners that they will never reach out by email or phone asking you to apply for an SBA Paycheck Protection Program (PPP), 7(a) or disaster loan or grant.

“Fraudsters have already begun targeting small business owners during these economically difficult times,” the agency warned. “If you are proactively contacted by someone claiming to be from the SBA, suspect fraud.”

Here are a few tips to keep you safe from fraud when dealing with unsolicited emails or phone calls from people claiming to be from the SBA or another government agency:

  • Check that the email address ends in If it doesn’t, do not click on any links in the email, as it’s likely a phishing scheme trying to get ahold of your personal information.
  • Cross-reference any information you receive by visiting the SBA website. Just because an email has an SBA logo in it, that doesn’t mean it’s actually from the official agency. Check the SBA website, call its helpline at 800-827-5722 or email to ensure you’re getting all the facts.
  • Avoid PPP loans that guarantee approval if you pay an upfront fee or take out a high-interest bridge loan. No lender can guarantee approval for an SBA loan — and you should never be required to pay an upfront fee or take out a high-interest bridge loan to help you get a PPP loan.
  • Read up on the SBA fee limits. The SBA limits the amount of fees lenders can charge for its loan program, so read our guide to SBA guarantee fees to ensure you’re not being overcharged.
If you come across what appears to be a scam, you can report it to the SBA Office of the Inspector General by calling 800-767-0385 or filing a complaint online.

You can learn even more about coronavirus scams to watch out for with our guide.

7 signs you’re being scammed

There are a few red flags to look out for if you think you’re being scammed. If you encounter even one of these, it usually means your so-called lender wants to take your money, not give you some.

1. You’re asked for money up front

There’s never any reason to pay a lender or broker upfront. It doesn’t matter what reason they give — be it administration fees, credit check costs, processing costs or anything else. A loan broker should only ever get paid by the lender, in commission, after the deal is done.

Some lenders might have origination fees or costs, but these are rarely a significant figure and are only charged once your loan is funded. They should never ask for a down payment or other significant upfront costs before approval. If any loan officer or lender wants money upfront, be cautious and consider finding another lender.

2. There’s no contact information online

Avoid lenders who don’t have a physical address or easily-found contact information. Even lenders that are solely online like National Business Capital and SmartBiz have clear and easy-to-find contact details and headquarter locations that indicate their legitimacy.

3. It sounds too good to be true

It’s sad to say, but if a deal looks too good to be true, then it probably is. Lenders are competing with each other and are constantly trying to offer better rates and loan conditions to attract more business, but they have limits as to what they can offer without losing money. If there’s one lender that seems to be offering a deal that exceeds other deals, you may have cause to be suspicious.

4. The lender guarantees you’ll be approved

No lender can guarantee that you’ll be approved for a loan. When a business offers customers a guarantee, that’s a binding promise they must deliver on. Without submitting your business application, you shouldn’t trust any guaranteed loan.

5. The lender uses a generic email addresses

If a business lender is emailing you from a Gmail, Hotmail, Yahoo or other generic email account, then something is off and you should tread carefully. Lenders should be conducting all business with an official business email address.

6. The lender contacted you

If a lender offers you an unsolicited loan, it may be a sign of a scam. Lenders don’t offer loans with a cold call. They might send promotional letters in the mail or display ads on your browser, but even those are based on some background information on you. Similarly, you should also be aware of services you don’t want and didn’t ask for, like business plan writing or credit repair. Although these are legitimate services in their own right, they are generally not offered without prompting.

7. The lender is aggressive

Does your lender seem a bit too eager? Is it contacting you frequently, trying to rush you into a decision, offering free gifts or throwing around phrases like “limited time only” or “last chance”? Legitimate lenders make their money from offering sensible options that you can repay as planned. Scammers make their money by rushing people into bad decisions with big promises and then running away with the money.

SBA loan scams

The Small Business Administration (SBA) warns small business owners to look out the following red flags when applying for one if its loan programs.

  • Solicitations. The SBA will never reach out and ask you to apply for any of its loan programs, including 7(a) loans, the Paycheck Protection Program, disaster loans or grants. Neither will the Treasury Department, so stay away from anyone who does.
  • Guaranteed approval — for a fee. Also stay away from lenders guaranteeing approval for a fee — especially if it promises fast funding. Legitimate SBA lenders can’t tell if you’ll be approved until you apply, and the SBA doesn’t allow upfront fees.
  • High broker fees. The SBA sets limits on all of its fees, including how much brokers can charge for their services. Avoid any broker or lender charging more than they’re legally allowed.
  • SBA imposters. Some scammers will pose as SBA employees. Avoid opening emails from the SBA, unless the email address ends with And avoid opening links that direct you to an SBA website, unless it ends in .gov.
  • Requests for personal information. Legitimate lenders generally won’t ask for sensitive information like your Social Security number or bank account number over email. If your lender asks for this information, call customer service to confirm the email is actually from them.

Are online business loans safe?

It depends. There are plenty of legitimate online lenders that might ring your alarm bells if you’re used to dealing with banks. There are also fake online lenders that look professional at first glance. Hold online lenders to the same standard as you would any other provider.

It’s important to remember that there’s a difference between a scam and a bad deal. Not all lenders with low credit requirements, for example, are going to run off with your money or Social Security Number. But you could end up in a cycle of debt if you can’t afford to make payments — something you might also want to avoid.

3 online business loan scams to watch out for

Crooks are getting increasingly tech-savvy when it comes to taking advantage of the unwary. This lets them strike at US business owners from outside the country and steal not only money but also valuable personal information. They may approach you with:

  • Ads on legitimate websites. Just because someone is advertising an offer doesn’t mean they’re the real deal. Be suspicious of online ads for guaranteed approval or unrealistically good rates.
  • Fake websites. Sometimes scammers will create their own imitation business website and then use this to “prove” that they’re real. They might send out links to it in emails and elsewhere. It’s important to remember that having a professional looking website doesn’t necessarily mean a company is legitimate. Check for things like verified contact information and state licenses to confirm legitimacy.
  • Cold calls. Whether it’s through text messages, emails, phone calls or social media, beware of a lender that keeps dangling a website address in front of you like a fishhook. Don’t click links you find in emails from unknown senders or in texts from unknown numbers.

Once they have your attention, scammers will typically use a few tricks to keep it and create the illusion of legitimacy.

  • They will sometimes offer an a state license number that’s real, but belongs to a different, legitimate business.
  • They might direct you to a basic website with a landing page for their fake business.
  • They may ask for your contact details or personal information to “run a credit check” or “verify your identify” when they in fact plan to sell it to the highest bidder or use it for identify theft.
  • They may pose as an international group or government agency with an official-sounding fake name like The International Securities Tax Commission.

How to spot a legit business lender

Separating the two is easy once you know how. Scammers can fake legitimacy in a few different ways, but there will always be signs to look out for. The trick is to make sure that everything adds up. You should know:

  • The name of the company representative you’re speaking with and the name of the company itself
  • The company’s state license number
  • The company’s public phone number
  • The company’s physical address

If the lender has these, look for anything that doesn’t match. Then

  • Check the license and make sure it matches the name of the company, the physical address and the phone number.
  • Call back the phone number to make sure it’s real and that you can reach the company with it.
  • Match the physical address with the license number and phone number if possible.
  • Search the company’s name online and look for any scam warnings, feedback or red flags from other business owners.

Compare legit business loan providers

Data indicated here is updated regularly
Name Product Filter Values Loan amount APR Requirements
First Down Funding business loans
$4,000 – $300,000
5.49% to 22.79%
At least 1 year in business, an annual revenue of $100,000+, and a minimum credit score of 300
Alternative financing up to $300K with highly competitive rates.
Lendio business loan marketplace
$500 – $5,000,000
Starting at 6%
Operate business in US or Canada, have a business bank account, 560+ personal credit score
Submit one simple application to potentially get offers from a network of over 75 legit business lenders.
$2,500 – $5,000,000
7% to 30%
$300,000+ of annual revenue, 680+ personal credit score, in business for 3+ years
Get connected with short-term funding, SBA loans, lines of credit and more.
Kickpay e-commerce loans
$20,000 – $1,000,000
Not applicable
At least $250,000 in the past 12 months of revenue, e-commerce business, use a 3rd party fulfillment center for storing and shipping inventory, at least one US location.
Get a loan for your e-commerce business based on your sales history.
Credibly business loans
$5,000 – $250,000
6+ months in business, $180K annual business revenue, 500+ credit $15K+ in monthly deposits
Funding to cover business expenses with daily or weekly repayments.
$30,000 – $5,000,000
4.75% to 7.00%
650+ personal credit score, US citizen or permanent resident, 2+ years in business, $50,000+ annual revenue, no outstanding tax liens, no bankruptcies or foreclosures in past 3 years
Get funding for your small business with a government-backed loan and extended repayment terms.
LendingClub small business loans
$5,000 – $500,000
9.77% to 35.98%
12+ months in business, $50,000+ in annual sales, no bankruptcies or tax liens, at least 20% ownership of the business, fair personal credit score or better
With loan terms that vary from 1 to 5 years, enjoy fixed monthly payments and no prepayment penalties through this award-winning lender.
Monevo Business Loans
$500 – $100,000
3.99% to 35.99%
Credit score of 500+, legal US resident and ages 18+.
Use this connection service to get paired with a loan you can use for business.

Compare up to 4 providers

What to do if you’ve been scammed

If you’ve become the victim of a scam, there are three main things you need to do:

1. Recover your losses

Sadly, most scam victims won’t see their money again. This is because it’s usually very difficult to track the scammers down, and in many cases they’re overseas where American authorities can’t reach them.

If you’ve sent money or information to a scammer, contact your bank immediately. It can cancel any future transactions that may be in the works and close your account if you’ve sent the scammer any information that may have compromised it.

2. Report it

If you’ve encountered a scam lender, or any other fake financial services providers, you should report them to the Federal Trade Commission and Better Business Bureau.

  • Federal Trade Commission (FTC). Visit the FTC’s complaints page to submit the details of the scam. The FTC will investigate the “business” of concern and work to put an end to their harmful practices.
  • Better Business Bureau (BBB). Visit the BBB’s scam tracker and provide details of the scam that took place. The BBB will make the company name public so that others can be warned to stay away.

3. Avoid follow-up scams

Scammers will often strike the same place twice. To ensure that you don’t fall into any more traps or follow-up scams, be aware of these schemes:

  • Offering more money or more returns to help you recoup your losses
  • Telling you to take out another loan so you can meet the repayments of the first
  • Claiming they can recover your losses for a fee
  • Asking you to pay for travel, accommodation or other costs so that they can “find the scammer” or “get your money back”

Because it’s rare for people who’ve been scammed to see their money again, you’re better off being proactive about protection by following this guide and only dealing with reputable, verified and well-known lenders, the big banks or other established institutions.

The FTC has a scam alerts feed that can alert you of new scams and keep you updated on warning signs to watch out for. You can also place yourself on the National Do Not Call Registry to prevent unsolicited phone calls from telemarketers.

Bottom line

The best way to prevent falling for a scam is to know what to look for when you apply. By keeping your safety — and the safety of your business — at the forefront of every loan application, you can stay one step ahead of any potential scammers. And even if you’ve become a victim, there are still ways you can fight back, even if you can’t recoup your losses.

When looking for a business loan, it’s best to know where to find legit lenders to avoid a business loan scam.

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4 Responses

  1. Default Gravatar
    KarimFebruary 5, 2019

    I’m having an agreement with a funding company and I don’t know if they are legit or not. I might need help with that.

    • Avatarfinder Customer Care
      JeniFebruary 13, 2019Staff

      Hi Karim,

      Thank you for getting in touch with finder.

      I suggest that you personally seek help from some financial experts on this matter. Since you’re from Egypt, it would be a good idea to check some government agencies that can assist you on checking this funding company’s background or record.

      I hope this helps.

      Thank you and have a wonderful day!


  2. Default Gravatar
    MphoSeptember 15, 2018

    Hi how will you know if hoopla loan is registered with NCR

    • Avatarfinder Customer Care
      CharisseSeptember 15, 2018Staff

      Hi Mpho,

      Thanks for reaching out to finder.

      Hoopla Loans is not a lender but an online loan matching broker so they will really not be registered with NCR. They help by connecting borrowers to lenders on their panel and as per Hoopla Loans, all the lenders in their panel are licensed by the NCR.

      If you want to check if a lender is registered with NCR, you can go to their website and search their database using the name of the lender you want to verify.


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