How to Avoid Falling Victim to SBA Loan Scams

by Kieran Daly
May 9, 2023
How to Avoid Falling Victim to SBA Loan Scams

Fraud is on the rise. In 2022, people reported losing $8.8 billion to fraud, up 30% from the year prior. Imposter scams, or people pretending to be from businesses or federal agencies, was the number-one fraud reported.

During the pandemic, fraudsters took advantage of vulnerable business owners, impersonating lenders and offering disaster loans or fraudulently applying for Paycheck Protection Program (PPP) loans.

As a small business owner, it’s important to be diligent about scams, including SBA loan scams. These scams can take on many forms, from people pretending to be SBA agents, to phishing schemes, to fraudulent businesses. 

Here is everything you need to know about SBA loan scammers and how to avoid falling victim to fraud and keep your business and money secure. 

What Are SBA Loans? 

With small businesses making up 99% of all U.S. businesses, the U.S. Small Business Administration is tasked with helping entrepreneurs and small business owners. 

The SBA is an agency of the federal government that was established to help small business owners get funding and expand their businesses. An SBA loan is a business loan made by financial institutions or nonprofits and backed by the SBA. In other words, the SBA guarantees the loan, making lenders more likely to lend money to small business owners.

There are several types of SBA programs and loans, such as SBA 7(a) loans and SBA 504 loans. These loans are a great resource for businesses that might struggle to get funding elsewhere, but applying for them can be tedious and time-consuming. 

How Do SBA Loan Scams Work? 

There are many different tactics that fraudsters will use to try to scam you or your business out of money. Here are some common SBA loan scams to watch out for: 

  • Phishing scams: Scammers will send emails that appear to be from the SBA or a legitimate lender, requesting personally identifiable information such as Social Security numbers, bank account details, or other sensitive information.

  • Advance-fee scams: This is when a fraudster will request applicants pay upfront fees for loan processing or approval but then disappear once the fee is paid, leaving the applicant without a loan.

  • False promises of guaranteed approval: Scammers will promise loan approval or easy access to SBA loans, even for businesses that do not meet the eligibility criteria, in exchange for a fee or personal information.

  • Impersonation of SBA lenders: In this common tactic, the scammer will pretend to be legitimate SBA lenders or loan brokers, using fake websites or phone numbers, to trick business owners into sharing personal and financial information.

  • Loan modification scams: A scammer will target business owners who have already received SBA loans and promise to modify the loan terms (such as lowering interest rates) in exchange for upfront fees but then fail to deliver on their promise.

These are just a few examples of SBA loan scams. It's important to be vigilant and do thorough research before applying for a loan or sharing any personal information with a lender. Remember that the SBA does not reach out to businesses or individuals about loans or ask you to provide information that you already submitted in your application. 

Tips for Avoiding SBA Loan Fraud 

No one wants to be a victim of fraud, but unfortunately, scammers are getting smarter. Make sure to follow any fraud alerts issued by the SBA or your lender. Here are some other tips to avoid SBA loan scams. 

Research the Lender 

If an SBA lender reaches out to you, or you’re looking for a small business loan, make sure to do your due diligence. Research the lender online. Check third-party sites like TrustPilot or the Better Business Bureau for reviews of the lender or organization reaching out to you to make sure the lender is legitimate. 

You can also check the lender’s social media to see if they have a large presence. If they don’t have many followers or their accounts and website were just created, it could be a sign that it’s a fraudulent account. 

Be Wary of Unsolicited Offers

If someone reaches out to you unsolicited, claiming to be an SBA lender or agent, that’s a red flag. The SBA does not reach out if you have not applied for an SBA loan. If someone does reach out to you about a loan or grant and offers a high-interest bridge loan as you wait for your SBA loan, it could be fraud. Make sure to take steps to ensure your personal information is secure. 

Verify the Lender's Identity and Credentials 

If a lender reaches out to you or sends you an email, make sure to verify their identity. Check for any suspicious spellings in the email address as well as in the email itself. And check logos, such as the SBA logo, to see if anything looks off, like font size or color. If they are asking about an application you submitted, make sure the application number matches. 

Don't Pay Any Upfront Fees 

If you are applying for an SBA loan or other type of working capital advance, never pay upfront fees. The SBA limits the fees a broker can charge to 3% for loans under $50,000 and 2% for loans up to $1 million, with an additional quarter fee on anything over that. If someone reaches out to you claiming to be an SBA lender and their fees are higher, it could be a scam.  

Don't Share Sensitive Information 

Be careful about sharing sensitive data, such as your Social Security number. While you’ll need to provide this information to apply for a loan, make sure you only submit your data on sites that are secure. And make sure to check that the lender you are applying to is a legitimate business. 

What to Do If You Have Been Scammed 

If you have been a victim of an SBA loan scam or suspect fraud, the first thing to do is report it to the authorities. Depending on the type of scam, you can file a report with local law enforcement, especially if you lost money or property. You can also reach out to the SBA directly at or the SBA OIG hotline. Reporting fraud can help catch the perpetrator and prevent others from falling victim.

Make sure you also contact your lender and monitor your credit report. This is especially true if you were a victim of identity theft. If necessary, seek out legal assistance to find out your options for getting your money back. 

Be Vigilant When Applying for an SBA Loan 

Being a small business owner is already difficult enough without having to worry about getting scammed out of your hard-earned money. When applying for an SBA loan, make sure to do your due diligence and be wary of any unsolicited emails or letters from someone claiming to be from the SBA.

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