Small businesses are oftentimes caught in the crosshairs of scammers. Most recently, crooks have been targeting small businesses with non-existent disaster assistance loans. Here’s how the scheme works. Businesses receive an email from the “Small Business Administration Office of Disaster Assistance”, claiming they are eligible for a loan of up to $250,000. The email asks for personal information, such as date of birth and social security number. Business Consumer Alliance (BCA) wants you to know it’s a scam. The Small Business Administration (SBA) does not initiate contact for disaster loans or grants.
Legitimate lenders will not tell you that you’re automatically eligible for a loan. If you’re asked to provide your personal information before you’ve even reviewed the loan terms and information, that’s a clear sign you’re dealing with a fraudster whose real goal is to steal your identity. Always use caution when you are contacted out of the blue by anyone claiming to be from a government agency. It is more than likely an imposter looking to defraud you. This is true even if they use what appears to be an official logo or they call from a number that shows up on caller ID as a government agency. Scammers use software to spoof real agency information. Also, if you’re required to make any up-front payment, it’s a fraud.
Spotting Fraudulent Offers
The methods scammers use to pull off loan schemes may vary, but some basic red flags can identify a fraudulent lending offer. Here are some signs to watch for:
- Unsolicited loan offers.
- Up-front fees required before approval.
- Guaranteed approval before proof of income or ability to repay the loan is verified.
- Questionable payment methods such as sending fees or payments through MoneyPak, wire transfer, through gift cards or prepaid cards, or payments mailed to foreign mailing addresses.
- The solicitation comes from a generic email address such as Gmail or Yahoo.
- Business has no physical address or contact information on their website or materials.
- High pressure sales tactics.
While this is not a full list of tactics crooks employ to defraud borrowers, they are good indicators that the offer is not legitimate.
Think You’ve Been Scammed?
If you suspect you’ve been scammed by a loan scam, act right away. If you sent money to a scammer or provided sensitive information to someone untrustworthy, contact your bank or financial institution as soon as possible. Monitor your accounts and credit report for suspicious and unauthorized activity. Report the incident to law enforcement, the Federal Trade Commission, and file a complaint with Business Consumer Alliance. Suspected fraud regarding small business loans can be reported to the Office Inspector General by calling their hotline at (800)767-0385 or online at https://www.sba.gov/about-sba/oversight-advocacy/office-inspector-general/office-inspector-general-hotline.
Looking for a Loan?
Small business operators that are looking for a loan have several options. Visit the official Small Business Administration website, www.sba.gov, for COVID relief programs that can provide assistance to your business. You can also contact a trusted financial institution in your community for available loan and grant programs.
Always do your research before providing any sensitive information to a lender. Check out the business’ background, any licensing requirements, and their reputation before agreeing to any terms. Read the agreement thoroughly and make sure you understand what you’re agreeing to before signing. If there are things you do not understand, don’t proceed unless they are explained and what is written in the agreement is what has been represented to you verbally.
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About Business Consumer Alliance
Business Consumer Alliance (BCA) is a non-profit company that started in 1928. The broad purpose of BCA is to promote business self-regulation. BCA's mission is achieved by assisting consumers in resolving complaints with businesses and using that complaint information, along with other relevant information such as customer reviews, to forecast business reliability. With community support, BCA can identify trustworthy and ethical businesses and warn the public to avoid unscrupulous businesses whose purpose is to defraud the marketplace. BCA also helps businesses promote themselves by providing services and tools to protect their business and reach out to their customers. BCA obtains its funding from member businesses who support the mission and purpose of the organization and who agree to abide by high standards of ethical business practices.