A Guide to Avoid Loan Scams

Don't let your business fall victim

A spike in scams

There has been a spike in scams during the COVID-19 outbreak. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), includes provisions to help small businesses. Unfortunately, the act has given rise to opportunistic scammers who are creatively engaged in grant fraud, loan fraud and phishing schemes.

It’s easy to mistake a scam for a real offer. The following example, from the Better Business Bureau, shows just one example of how a typical scam works:

An email, text or caller ID appears to be from the U.S. Small Business Administration or an attorney representing the SBA. The “SBA” is offering grants just for small businesses affected by the coronavirus outbreak. The application looks simple and may involve completing a short form requesting banking and business information. After being approved, the business owner is asked to pay a “processing fee” up to a couple thousand dollars.

The BBB says it’s gotten recent reports of a new twist to the scam. After the “government agency” contacts business owners about the grant, a friend then reaches out through Facebook. This “friend” claims to have successfully received money from the exact same grant and wants you to know about the program. Of course, the “friend” is not really a friend, but a compromised Facebook account, contacting all your friends on Facebook.

Tips from the SBA and BBB:

Grants

• SBA does not initiate contact on either 7a or disaster loans or grants. If you are proactively contacted by someone claiming to be from the SBA, suspect fraud.

• If you have to pay money to claim a “free” government grant, it is not really free. A real government agency will not ask you to pay an advanced processing fee.

Loans

• If you are contacted by someone promising to get approval of an SBA loan, but it requires any payment up front or offers a high-interest bridge loan in the interim, suspect fraud.

• SBA limits the fees a broker can charge a borrower to 3% for loans $50,000 or less, 2% on the first $1,000,000 for loans over $50,000 and an additional ¼% on amounts over $1,000,000. The maximum fee is $30,000. Any attempt to charge more than these fees is inappropriate. However, a broker and/or lender cannot charge borrowers any fees for a 2 Paycheck Protection Program Loan (“PPPL”). Any attempt to charge a borrower fees for a PPPL is inappropriate.

Phishing

• If you are in the process of applying for an SBA loan and receive email correspondence asking for Personally Identifiable Information (PII), ensure that the referenced application number is consistent with the actual application number.

• Look out for phishing attacks/scams utilizing the SBA logo. These may be attempts to obtain your PII, to obtain personal banking access or to install ransomware/malware on your computer.

• Any email communication from SBA will come from accounts ending with sba.gov.

• The presence of an SBA logo on a webpage does not guaranty the information is accurate or endorsed by SBA. Please cross-reference any information you receive with information available at sba.gov.

• Government agencies do not typically text or communicate through social media avenues such as Facebook. Be wary of unsolicited messages.

• If you have a question about getting a SBA disaster loan, call 800-659-2955 or send an email to disastercustomerservice@sba.gov.

If you have questions about other SBA lending products, call SBA’s Answer Desk at 800-827- 5722 or send an email to answerdesk@sba.gov.

Report any suspected fraud to Office of Inspector General’s Hotline at 800-767-0385 or online at, sba.gov/about-sba/oversight-advocacy/office-inspector-general/office-inspector-general hotline.

For more information:

SBA Programs: Scams and Fraud Alerts

BBB Scam Alert: Don’t Fall for Phony SBA Grant Offer

Avoid Small Business Lending Scams and Fraud Related to COVID-19

BBB Consumer Tips Regarding COVID-19

BBB Business Tips Regarding COVID-19

BBB Scam Tracker

FBI Coronavirus Information Page

FBI COVID-19 Scam Alert

CDC Coronavirus Information Page

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