How to Avoid COVID-related Small Business Loan Scams

Learn how to stay vigilant about small business loan scams during COVID-19 and decrease your chances of becoming a victim of one.


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Do’s and don’ts of pursuing coronavirus-related funding for your business

Even in the time of a global pandemic, scammers don’t rest.

With the government recently adding another $310 billion in funding to the initial $349 billion allocated to the Paycheck Protection Program loans, scammers continue to be hard at work to take advantage of desperate and confused small business owners.

Their goal, according to the Federal Trade Commission, is to “trick you into giving them sensitive business information, like your bank account numbers, employees’ Social Security numbers, and even your money.”

Talk about another stress during an unprecedented stressful time.

The idea of being scammed is certainly scary, but luckily there are a few things you can do to stay vigilant about small business loan scams and reduce your chances of falling victim to one. Here are a few do’s and don’ts to keep in mind as you pursue CARES Act funding for your small business.

Don’t pay in advance

Whether you’re being asked to pay in advance for information or for a loan itself, stop — that’s fraud. All information from the United States Small Business Association (the organization handling the PPP and Economic Injury Disaster Loans) is on its website for free. It’s also not required to pay anything upfront to get an SBA loan.

Don’t respond to unsolicited messages

The SBA will never initiate contact with anyone in order to get them to apply for a loan.

The SBA will never call you unsolicited, especially if it’s about 7a, disaster loans, or grants. Keep in mind: the SBA doesn’t initiate contact for that kind of funding.

In fact, the SBA will never initiate contact with anyone in order to get them to apply for a loan. Nor will they send emails or text messages asking for sensitive information that can be used for identity theft.

Don’t click on links in emails or texts from unknown sources

If you receive contact about SBA loans from a suspicious source, don’t click on any links or send any replies. This can invite malware into your device that connects to a scammer or hacker.

Do get information about SBA loans from trusted sources

Any information you receive about SBA loans should be verified by cross-referencing it with the SBA website. Beyond that, only get information from reliable sources like a trusted accountant or lending institutions that you have long-term relationships with.

Do verify your lender

The SBA has created an online tool to help people find authorized lenders in their area. This is important because only SBA-authorized lenders can provide PPP loans. If you’ve been contacted by an institution that you can’t find on the SBA’s website, chances are it’s a scam.

It’s also important to know that the SBA has capped the fees that borrowers can charge at:

  • 3% for loans of $50,000 or less
  • 2% for loans between $50,000 and $1,000,000 with an additional 0.25% on loans over $1,000,000

If your lender is trying to charge you more, that’s against SBA regulations and could be a signal of fraud.

Do look for more than just the SBA logo

Scammers often rely on the fraudulent use of official logos to trick their audiences into thinking that they’re the legitimate organization they’re impersonating. If you’re receiving communication from the SBA, any email from them will always end in

If you’re receiving communication from the SBA, any email from them will always end in

Do report fraud

If you come across a scam or find yourself the victim of fraud related to the SBA coronavirus relief, report it to the Office of Inspector General. There’s a hotline for doing exactly that which you can find here. In order to submit a claim, make sure that you have this information available before you start:

  • The SBA program related to your complaint
  • Any information you have about the person, business, or department you’re filing the claim against such as their name and contact information
  • A narrative that explains the activity you’re reporting: how they contacted you, what they were looking for, and the timeframe of the contact or activity with them
  • Any additional documents or attachments you want to include to support your complaint

You can submit a complaint anonymously, but doing so does make it harder for the Office of Inspector General to clarify initial reports or obtain important follow up information. Thus, it’s important to decide whether or not you want to provide identifying information.

Do stay on top of current scam tactics

Because scamming is sadly a common practice, the FTC has a Pass It On resource that catalogues scams as they pop up. If you’re suspicious that communication you’ve received might be a scam, consider checking to see if the FTC has already documented it.

Beyond just SBA-related fraud, scammers are taking full advantage of the COVID-19 crisis to conduct scams relating to Medicare and relief payment from imposters claiming to be the Social Security Administration, IRS, Census Bureau, U.S. Citizen and Immigration Services, and the Federal Deposit Insurance Corporation.


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