How to avoid business loan scams (2026)

Many entrepreneurs rely on loans to get their businesses started and grow, and lenders are helping support these businesses by streamlining the lending process for faster turnaround and less paperwork.

These changes have also opened up new ways for scammers to target small business owners who might be unfamiliar with the lending process.

Learn to identify the common tricks scammers use and keep your business — and your hard work — safe.

Small business loan scams: How they work

Business loan scams can happen in different ways: A scammer might pretend to represent a bona fide lender to gain your trust — and then take your money. Or, they’ll persuade you to give up your personal identifying information that they’ll use to open new accounts under your business’s name.

Loan phishing is another tactic where the scammer hooks their target with big promises they fail to deliver on or hides the real costs associated with the loan.

Some scammers provide fake agent ID numbers and go so far as to replicate company logos representing a legit company.

Learn more details on common tactics scammers use to take advantage of small business owners.

5 common business loan scams

Numerous hints will indicate that a business loan scam is working against you: Maybe you’re pushed to pay upfront fees or share personal identifying information or account details.

Maybe the lender guarantees your approval, hides loan details until after you apply or promises unrealistically good rates and lengthy repayment terms. Maybe the cost of your loan is far above the average costs of interest for a business loan. And scammers can hit you with these tactics — and more — from almost any platform.

If you’ve experienced any of these scenarios, it’s usually a sign your “lender” wants to take your money rather than support your business.

1. Advance fee scams

Shady lenders typically target business owners with low credit scores who have already applied for a loan. They’ll offer a guaranteed loan or a list of lenders who work with bad-credit applicants – if you pay in advance.

Or they’ll use the excuse of upfront administration fees, credit check costs, processing costs or anything else. Once you pay the fee, the lender either disappears or stalls the process and you get nowhere. But in reality, there’s never a reason to pay a lender or broker before you borrow.

Lenders might have origination fees or costs, but the lender only charges these once your loan is funded — and these fees are either deducted from the funding amount you receive or incorporated into the loan’s cost. A lender should never ask for a down payment or other significant advance costs before approval. And a lender always pays a loan broker in commission after the deal is done.

Protect yourself by verifying the lender’s identity and the promises it’s made to you through the lending institution. Never accept promises of guaranteed approval: If you hear language like: “No history? No credit? No problem!” coupled with a demand for money up front, look elsewhere.

2. Credit repair scams

Business owners with less-than-stellar credit might opt to work with a credit counselor to improve their credit file. And some scammers pose as credit counselors and take a borrower’s money without providing any relief — putting them further in the hole.

Scammers who prey on low-credit business owners may claim a guaranteed improvement in their credit score or eliminate negative flags on their report — even if the information on the person’s file is up-to-date and accurate. These promises are usually a sign the lender is up to no good, especially in combination with these ploys:

• Asks you to dispute accurate information on your credit report. If the info on your credit file is accurate and timely, there’s never a reason to dispute it.
• Avoids or refuses to explain your rights to you. A legitimate lender will explain your rights regarding your credit report — for free. You have the right to dispute errors and view your report at any time without getting a hit on your credit.
• Tells you not to contact the credit bureaus on your own. It’s always in your best interest and within your legal right to regularly follow up on your credit profile status with the three credit bureaus: Equifax. Experian and TransUnion.
• Pressures you to pay upfront fees. Never pay ahead for a product or service, especially without knowing the finer details.
• Promises to remove negative flags on your file. No one has the ability to do this. The only way a red flag on your file disappears is with time.

If you’ve registered with a credit repair service, you have the legal right to cancel any credit repair service within three business days — for any reason and for free.

3. Loan-by-phone scams

Scammers might attempt to cheat you out of your money over the phone. They work to get your information — either personal identifying information or bank account information — to steal your identity. Sometimes they come off as helpful and empathetic; other times, they are aggressive and threatening.

Either way, whether they promise you gifts or unrealistic rates or threaten you with legal action, you can protect yourself once you can identify a phone scam. Be on the alert if:

• You’ve been “chosen” to receive a prize. Legitimate lenders don’t work this way. If an agent or lender claims you must pay ahead to get a prize, they’re working to take advantage of you.
• They threaten legal action against you. If you’re threatened with fines, arrest or deportation, rest assured real federal or law enforcement agencies won’t call or threaten you.
• You’re being pressured to make a decision. If you’re being pressured to act now or hear language like, “This is a one-time offer,” those are signs of a scam. Take the time to get any offer in writing to decide if it’s right for you. You never have to make an immediate decision.
• Never send cash or pay with a gift card. Scammers often request your money from you in these ways:
  • Cash reload cards
  • Gift cards
  • Money transfer app
  • Money wire
  • Prepaid card

  It’s difficult — if not impossible — to get your money back if you use any of these methods. No legitimate lender will ask you to use these payment methods for a loan.

Cold-calling is illegal, so you shouldn’t receive phone calls from companies you’ve never done business with before.

A company needs your permission to call you with a robocall if it’s selling you a product. The best way to protect yourself from phone scammers is to register with the National Do Not Call Registry.

4. Online scams

Increasingly tech-savvy crooks do what they can to take advantage of anyone unaware of the risks. The internet allows them to strike at US business owners from outside the country to steal money and valuable personal information to sell or use to open credit accounts and wrack up serious debt in your name.

An online scam can look like any of these:

• Ads on legitimate websites. Just because a lender is advertising an offer you can’t refuse doesn’t mean it’s the real deal. Be suspicious of online ads for loan products that seem too good to be true — they almost always are.
• Fake websites. Sometimes a scammer creates an imitation business website to “prove” their authenticity. They might send out links to its website in emails and messages.
• Fake names. A scammer may pose as a trusted business, international group or government agency with an official-sounding fake name like The International Securities Tax Commission to trick you into sending personal information.
• Generic email address and no physical address. A sign that unscrupulous business is at play is if you receive an email from a generic domain like hotmail, yahoo or gmail, but you can’t find the lender online, by phone or in person.

How to protect yourself from online scams:

• Verify the representative or agent. Their name, identity or badge number and state licenses to confirm legitimacy.
• Search the company’s website. Browse through it, look at its About us page and how you can make contact. Look at reviews, feedback and red flags from other business owners. A website that seems professional doesn’t necessarily mean a company is legitimate.
• Get a phone number and business address. Then follow up. Even businesses operating solely online, like National Business Capital and SmartBiz, have clear and easy-to-find contact details and headquarter locations to indicate their legitimacy.
• Never give out any personal or account details. Don’t share any sensitive info — like your Social Security number — with anyone until you’ve fully vetted the lender and have gone through the application process.

5. Small Business Administration (SBA) loan scams

The SBA isn’t immune to scammers using its name to take money from unwary business owners. The SBA warns small business owners to watch for the following warning signs when applying for a loan program:

• Solicitations. The SBA will never reach out and ask you to apply for any loan program, including 7(a) loans, disaster loans or grants. Neither will the Treasury Department — so stay away from any lender who does this.
• 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 fee limits, 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 pose as SBA employees to prove they’re legitimate. Avoid opening emails from the SBA unless the email address ends with sba.gov. And avoid opening links that direct you to an SBA website unless it ends in .gov.
• Requests for personal information. Legit 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 situation.

Report abuse, fraud and mismanagement or waste of federal funds. Protect yourself and other business owners from scammers acting under SBA programs, operations or as SBA employees.

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

Who is most likely to be researching business loan scams?

Finder data suggests that men aged 35-44 are most likely to be researching this topic.

2 scams to look out for after you’ve taken a business loan

Business owners must also be wary of post-loan scams. Be aware of these two scams — especially if your business struggles to handle its debts.

1. Debt relief scams

There are legit business debt relief options. Debt settlement and debt management companies charge a fee, but this should only be after they reach out to your creditors and negotiate a deal. Again: be cautious of any business that contacts you first or offers guaranteed approval.

Thoroughly investigate any debt relief company 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.

2. Debt collection scams

While a legit lender will contact you if your business 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 must make immediate payments, may be arrested or have legal action taken against you, ignore it.

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.

Remember: Even if your debt is sold to a debt collection agency, it’s illegal for it to harass you. Keep tabs on your debt — even if you default — and report any malicious collection tactics to the Federal Trade Commission (FTC).

If your lender decides to pursue legal action against your business, you’ll receive official notice, not harassing phone calls. Add your phone to the Do Not Call Registry through the FTC for further safeguarding.

What to do if you’ve been scammed

If you’ve been victimized by a scam, take these steps:

1. Recover your losses

Contact your bank immediately if you send money or information to a scammer. It can cancel any pending transactions with the lender and close your account to protect it from being compromised.

Sadly, most scam victims won’t see their money again. It’s usually next to impossible to track down scammers, and in many cases they’re overseas and out of reach of American authorities.

2. Report it

If you’ve encountered a scam lender, or any other fake financial services providers, 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 end 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 others know to stay away.

3. Look out for follow-up scams

Scammers often strike the same place twice. To ensure you stay safe from any more traps or follow-up scams, be aware of these schemes:

• An offer for more money or more returns to help you recoup your losses
• The suggestion to take out another loan to meet the repayments of the first
• A claim a company can recover your losses for a fee
• A request to pay for travel, accommodation or other costs to “find the scammer” or “get your money back”

Because it’s rare for businesses that have been scammed to see their money again, be proactive and protect yourself by following this guide and only dealing with reputable, verified and well-known lenders, big banks or other established institutions.

An FTC scam alerts feed will alert you of new scams and update you on warning signs to watch out for. And remember to sign up for the National Do Not Call Registry to prevent unsolicited phone calls from telemarketers.

How to find a legit business lender

While scammers can fake legitimacy, there will always be signs to indicate otherwise. The trick is to make sure that everything adds up. You should know the:

• Company name.
• Name of the company representative you’re speaking with.
• Company’s state license number.
• Company’s public phone number.
• 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 company name, its physical address and 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.

And trust your gut: Don’t rely on any lender or company that gives you a bad feeling.

Bottom line

The best way to prevent falling for a scam is to know what to look for before you apply. Keep your safety — and your business’s safety — at the forefront of every loan application to stay one step ahead of any potential scammers.

And you can fight back if you’ve become a victim, even if you can’t recoup your losses. Also, be aware of some common personal loan scams — falling victim to one could impact your business.

Know where to find legit lenders to avoid a potential business loan scam when looking for a loan.

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Frequently asked questions

How do I get my money back after I’ve been scammed?
If you’ve sent funds by wire transfer or paid any “fees” with a gift card, then you’re likely out of luck. Check with your bank or credit card company to see if there are any options available to you.

When do legit lenders ask for bank account information?
A lender will usually ask for some banking info after you’ve applied for the loan. It may request your business bank account number and your bank’s routing number to confirm you have the funds to repay your loan.

But legit lenders will never ask for a password or other login information. If your lender does, be careful: You’ve likely run into a scam.

When am I better off getting a loan from a bank?
It depends on your needs. Even small business loans from banks can be relatively difficult for newer businesses to qualify for, and you may have to meet rigorous criteria to be eligible. There are legit lenders that operate online, so working with a bank isn’t the only way to avoid a scam.

To make sure you get accurate and helpful information, this guide has been edited by Kelly Suzan Waggoner as part of our fact-checking process.

Written by

Melanie Huddart

Editor

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Melanie Huddart is a personal finance editor and updates writer who's proofed and polished thousands of articles to help people make more informed financial decisions. She specializes in issues around accessibility and equality, as well as removing biases in managing finances for people who are unbanked or marginally banked. Melanie is an ASL-English Interpreter with experience in writing and learning assistance in college and high school classrooms, teaching English and Indigenous studies both in-person and online. She holds a BA in honors English and a Bachelor of Education from York University in Toronto. See full bio