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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.

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 a shady company that is trying to get your money, it's important to cease contact 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, don’t click on any links in the email, as it’s likely a phishing scheme trying to get a hold 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.
  • Avoid lenders offering PPP loans after the deadline is up. If you’re contacted by a lender offering access to the SBA Paycheck Protection Program after May 31, 2021, do not give them your information and file a report with the SBA immediately.

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 a reason to pay a lender or broker before you borrow. It doesn’t matter what reason they give — be it administration fees, credit check costs, processing costs or anything else.

Some lenders might have origination fees or costs, but these are only charged once your loan is funded — and they’re deducted from the amount of funding you receive or incorporated into the cost of the loan. A lender should never ask for a down payment or other significant upfront costs before approval, and a loan broker should only ever get paid by the lender, in commission, after the deal is done.

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. If you don’t have to submit an application and have your business or personal credit checked, look elsewhere for funding. It’s likely you’ve found a scam.

5. The lender uses a generic email address

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.

But also be wary of the specific email address in your inbox. Misspellings or similar names are also common tactics. If you receive an unsolicited email from a lender, visit its website and confirm the email on its contact page matches the email you received. If something seems off, delete it without opening it — some emails contain harmful links that can compromise your computer’s security.

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.

And while they might send promotional letters in the mail or display ads on your browser, these 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’re generally not offered without prompting.

7. The lender uses aggressive sales tactics

If your lender is contacting you frequently, trying to rush you into a decision, offering free gifts or throwing around phrases like “limited time only” or “last chance” — it may be a scam. Legitimate lenders make their money from offering sensible options that you can repay as planned.

While you may encounter legit lenders who want to push you toward a decision, 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 of 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 that guarantee 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.

3 common scams after you borrowed a business loan

As a business owner, you need to be wary of scams at all times. Once you’ve borrowed a business loan, be aware of these two scams — especially if your business is struggling to handle its debts.

Debt relief scams

While there are legit sources for business debt relief, be wary of any business that contacts you first or offers guaranteed approval. Debt settlement and debt management companies will charge a fee, but this should only be after they reach out to your creditors and negotiate a deal.

Be sure to look into the debt relief company thoroughly to confirm its legitimacy, and consider refinancing your business debt instead. It may not reduce what you owe, but it can make it easier for your business to afford monthly repayments.

Debt collection scams

While a legit lender will contact your business if it has fallen behind on payments, it won’t use threatening language or pressure you into sending funds. If you receive a call or email that states you need to make payments immediately, may be arrested or have legal action taken against you, ignore it. You should also reach out to your lender — it may be able to work out a repayment plan or offer some guidance to help you avoid falling for high-pressure debt collection tactics in the future.

Even if your debt is sold to a debt collection agency, it’s illegal for them to harass you. Keep tabs on your debt — even if you default — and report any malicious collection tactics to the FTC. If your lender decides to pursue legal action against your business, you will receive official notice, not harassing phone calls.

Compare legit business lenders now

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.

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. Hold online lenders to the same standard as you would a bank or credit union to avoid both scams and bad deals.

4 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. You may be approached with:

  • Ads on legitimate websites. Just because a lender is advertising an offer doesn’t mean it’s 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 it’s real. It might send out links to its website in emails and elsewhere. A website that seems professional doesn’t necessarily mean a company is legitimate. Check for things like verified contact information and state licenses to confirm legitimacy.
  • Fake names. A scammer may pose as an international group or government agency with an official-sounding fake name like The International Securities Tax Commission to trick potential victims into sending personal information.
  • 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.

Scammers will typically use a few tricks to keep it and create the illusion of legitimacy, like:

  • Offering a state license number that’s real, but belongs to a different, legitimate business.
  • Directing you to a basic website with a landing page for a fake business.
  • Asking for your contact details or personal information to “run a credit check” or “verify your identity” when they in fact plan to sell it to the highest bidder or use it for identity theft.

How to spot a legit business lender

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
  • The name of the company representative you’re speaking with
  • 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 follow these steps:

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

If something doesn’t match up or doesn’t seem right, drop the lender. There are plenty of legit options out there — so don’t rely on any lender or company that gives you a bad feeling.

See legit business loan providers

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Lendio business loans
Finder Rating: 4.75 / 5: ★★★★★

Lendio business loans
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 300 legit business lenders.

OnDeck short-term loans
Finder Rating: 4.6 / 5: ★★★★★

OnDeck short-term loans
29.9% to 99.9%
625+ personal credit score, 1 year in business, $100,000+ annual revenue, active business checking account
A leading online business lender offering flexible financing at competitive fixed rates.

ROK Financial business loans
Finder Rating: 4.7 / 5: ★★★★★

ROK Financial business loans
Starting at 6%
Eligibility criteria 3+ months in business, $15,000+ in monthly gross sales or $180,000+ in annual sales
A connection service for all types of businesses — even startups.

Fundera business loans
Finder Rating: 4.9 / 5: ★★★★★

Fundera business loans
7% to 30%
$50,000+ of annual revenue, 620+ personal credit score, in business for 6+ months
Get connected with short-term funding, SBA loans, lines of credit and more.

Biz2Credit business loans
Finder Rating: 4.7 / 5: ★★★★★

Biz2Credit business loans
Starting at 6.50%
6+ months in business; $100,000+ annual revenue; 500+ credit score
Get only the capital you need through secure, prescreened lenders with this highly rated company offering SBA, expansion, working capital and other loans.

Fora Financial business loans
Finder Rating: 4.1 / 5: ★★★★★

Fora Financial business loans
12+ months in business, $15,000+ monthly revenue, no open bankruptcies
Get qualified for funding in minutes for up to $750,000 without affecting your credit score. Best for companies with at least six figures in annual revenue.

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

If you 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.

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.

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 businesses that have 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, 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. You should also be aware of some common personal loan scams since falling victim to one could impact your business.

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