When your business needs money, speed matters. Scammers know that. They target owners who are under pressure to make payroll, cover a big order or replace broken equipment, and they dress their pitches up to look like real lenders, real government programs and real approvals.
The good news is that most funding scams follow the same playbook. In this guide, we walk through the nine scams the Federal Trade Commission (FTC), the U.S. Small Business Administration (SBA) and the Better Business Bureau (BBB) warn about most, the red flags that give them away, and a simple checklist for vetting any lender, including us.
At NexGen Lending, we help businesses across the country find legitimate financing. We’d rather you walk away from a bad deal than lose money to one.
Quick Reference: Common Business Funding Scams
| Scam | What they say | The giveaway |
|---|---|---|
| Advance-fee loan | “You’re approved. Just pay the fee first.” | Money due before you get funded |
| “Guaranteed” approval | “Bad credit? No problem. Guaranteed.” | No credit check or review |
| Lender impersonation | “We’re [a real lender you’ve heard of].” | Unsolicited contact, mismatched email or phone |
| Fake check and “insurance” | “Funds are in your account. Now send the insurance payment.” | A deposit that later bounces |
| SBA impersonation | “This is the SBA. Verify your details.” | Email not from @sba.gov, or any fee for SBA help |
| Fake government grants | “You qualify for a free federal grant.” | Grants that find you, plus a “filing fee” |
| Data harvesting | “Send your bank logins and SSN to finalize.” | Sensitive data before you know who they are |
| Bait-and-switch financing | “No personal guarantee, no upfront costs.” | Contract terms that don’t match the pitch |
| High-pressure closing | “This offer expires today.” | No time to read or ask questions |
1. Advance-Fee Loan Scams
This is the most common business funding scam. You’re told you’ve been approved, often without much of an application, and then asked to pay a fee before the money arrives. It might be called an “insurance fee,” “processing fee,” “origination deposit” or “first payment.” Once you pay, the lender disappears, or invents a second fee, then a third.
The FTC is clear on this one: a lender that promises you a loan and asks you to pay before you receive it is a red flag. Under the FTC’s Telemarketing Sales Rule, it’s illegal for companies doing business by phone in the U.S. to promise a loan and require payment before delivering it. The BBB gives the same warning about “guaranteed” loans that come with upfront fees.
Red flags:
- You must pay before you receive any funds.
- They want payment by wire transfer, gift card, payment app or cryptocurrency.
- The fee is due “today” to “lock in” your approval.
Legitimate lenders may charge fees, such as an origination fee, but those fees are disclosed in your written offer and are typically deducted from the loan amount at funding. You should never have to send money to a stranger to “release” a loan.
2. “Guaranteed” Approval With No Credit Check
“Bad credit? No problem. Guaranteed approval!” sounds like exactly what a struggling business wants to hear. That’s why scammers use it.
According to the FTC, legitimate lenders don’t guarantee credit before they’ve looked at your credit history. The BBB puts it even more bluntly: no legitimate lender will give you a loan without performing a credit check.
That doesn’t mean owners with imperfect credit are out of options. Programs like revenue-based financing weigh your sales more heavily than your credit score. But even those programs review your business before they approve you. A real lender always looks before it lends.
3. Impersonating Real Lenders
Some scammers don’t invent a fake company. They borrow a real one. The BBB has warned about fraudsters who copy a legitimate lender’s name, logo and contact details, then send unsolicited loan offers by email, text or mail.
Because the name checks out when you search it, victims feel safe. The catch is that the scammer, not the real company, is the one you’re talking to.
How to protect yourself:
- Find the lender’s website and phone number on your own, not from the email or text you received, and call to confirm the offer is real.
- Check that the sender’s email domain exactly matches the company’s official website. Watch for extra letters, swapped characters or free email addresses.
- Be suspicious of any loan offer you didn’t ask for, whatever channel it comes through.
4. Fake Check and “Insurance” Payment Scams
This variation of the advance-fee scam is especially convincing because you actually see money. As the BBB describes it, the scammer collects your bank details and deposits what looks like a loan check or transfer. Before it clears, they ask you to pay for “loan insurance” or some other fee. A few days later, the deposit is rejected by your bank. The money you sent is gone, and you may face bank fees on top of it.
5. SBA Impersonation Scams
SBA loans are among the most sought-after financing options in the country, so scammers frequently pose as the SBA, an SBA lender or a collections agency acting on the SBA’s behalf. The SBA has warned about phishing emails and calls that use fake SBA logos to steal personal information or install malware.
According to the SBA:
- Official SBA emails come only from addresses ending in @sba.gov.
- Federal guidance is free. Government employees will never charge you for help applying.
- If someone promises to get your SBA loan approved but requires payment up front, that’s a red flag for fraud.
- An SBA logo on a website or email doesn’t prove anything. Verify information directly at SBA.gov.
Keep in mind that SBA loans are made by SBA-approved lenders, not by the SBA directly, so you’ll typically work with a bank or lending partner. That partner should be able to explain the process, the program and any costs in writing.
6. Fake Government Grant Scams
Free money for your business, no repayment required. It’s the pitch scammers love most. The BBB warns that fraudsters pose as government agents by phone, email or social media, tell you that you qualify for a “free” government grant, and then ask for a “processing fee” or “filing fee” to release it. The grant never arrives.
The BBB’s warning signs:
- Real grants don’t come looking for you. You apply for them. If someone is actively offering to give you money, that’s a red flag.
- Real agencies don’t charge fees to receive a grant. If you have to pay to get it, it’s not a real government program.
- Official-sounding names can be made up. Names like “Federal Grants Administration” sound real but don’t exist.
- The official source for federal grants is Grants.gov. Start there, not with a phone call you didn’t expect.
7. Data Harvesting and Phishing “Loan Applications”
Not every scam is after a fee. Some are after your information. A fake lender, a fake “loan processing company,” or a lookalike application page collects your Social Security number, Employer Identification Number, bank account details and even your online banking login. That information can then be used for identity theft or to open credit in your business’s name.
The BBB has warned about scammers who leave urgent voicemails posing as loan processing companies and asking for personal details to “finalize” an application. The FTC also notes that some online “lenders” don’t make loans at all; they simply collect and sell applicants’ information.
How to protect yourself:
- Before you share sensitive data, find out who operates the company, where it’s located and how it’s licensed.
- Don’t click links or open attachments in unexpected financing emails. The FTC warns that even clicking a link can expose you to malware.
- Never share your online banking password. Legitimate lenders use secure, read-only bank verification tools or ask for bank statements.
8. Bait-and-Switch Financing and Hidden Contract Terms
Some of the costliest problems don’t come from fake lenders at all. They come from real financing companies that advertise one thing and put something very different in the contract.
The FTC has taken action against small business funders that allegedly:
- Advertised “no personal guarantee” and “no upfront costs,” then required both.
- Delivered less money than they promised.
- Had owners sign a confession of judgment, a clause that lets the funder get a court judgment against you without you having a chance to defend yourself.
- Used aggressive or threatening collection tactics.
Merchant cash advances and revenue-based products are legitimate tools when the terms are clear, and they help many businesses with uneven cash flow. The problem is fine print you didn’t read and terms nobody explained.
Before you sign anything, find out:
- The total amount you’ll receive and the total amount you’ll repay.
- Every fee and when it’s charged.
- Whether a personal guarantee is required.
- What happens if a payment is late or missed.
- Whether the contract includes a confession of judgment.
The FTC’s advice: if there’s anything you don’t understand, contact the provider and insist on an answer in writing. Our guide to comparing lender offers shows what to look for.
9. High-Pressure “Act Now” Tactics
“This rate expires at 5 p.m.” “I can only hold this approval for an hour.” Pressure is a tactic, not a feature. It’s designed to stop you from reading the contract, comparing offers or asking someone you trust.
The FTC’s guidance is simple: if a salesperson is rushing you, take that as a sign to look elsewhere. A real offer from a real lender will survive a day while you read it.
How to Vet Any Lender: A 10-Point Checklist
Use this checklist before you share sensitive information or sign a financing agreement, no matter who you’re working with.
- Did you reach out first? Treat unsolicited offers with extra caution.
- Can you verify who they are? Look for a real business name, physical address and phone number you can confirm on your own.
- Are they licensed or registered? The FTC recommends checking with your state attorney general or state financial regulator.
- What do others say? Search the company name with words like “review,” “complaint” or “scam,” and check its profile on BBB.org.
- Do the email and website match? Confirm the domain is spelled exactly right.
- Did they review your credit and business? No review is a red flag.
- Are they asking for money before funding? Walk away.
- How do they want to be paid? Gift cards, wire transfers to individuals, payment apps and cryptocurrency are warning signs.
- Is everything in writing? Get the full offer, every fee and the repayment terms on paper before you sign.
- Did you get a second opinion? The FTC suggests talking with a trusted advisor, accountant or your local Small Business Development Center before committing.
What to Do If You’ve Been Targeted
If you think you’ve been scammed, or even just contacted by a scammer, act quickly:
- Call your bank. Ask them to stop or reverse any payment, and watch your accounts closely.
- Change your passwords if you shared login details, and turn on two-factor authentication.
- Report it to the FTC at ReportFraud.ftc.gov.
- Report SBA-related scams to the SBA Office of Inspector General Hotline.
- Report identity theft at IdentityTheft.gov.
- Warn other business owners by reporting it to BBB Scam Tracker.
- Check your business and personal credit for accounts you didn’t open. Our business credit guidance team can help you understand your credit profile and build toward approval.
How to Find Legitimate Business Funding
The best defense against funding scams is knowing what real financing looks like. Legitimate lenders review your credit and business, explain your options, put every term in writing, and give you time to decide.
If you’re not sure what kind of financing fits your business, start with our guide to the best business loans in 2026. To compare lenders side by side, see the best business loan companies of 2026. If you need flexible working capital, our guide on how to get a business line of credit walks through the requirements and steps.
Why Business Owners Choose NexGen Lending
We think every business owner should vet their lender, and we welcome it. NexGen Lending is a real company with real people: our office is at 2 Hudson Place in Hoboken, New Jersey, and we serve businesses nationwide. You can call our team at (908) 639-4361 to talk through your options before you apply.
We offer 10 financing and advisory solutions, from SBA loans to term loans & unitranche debt, and we’ll walk you through the terms of any offer so you understand what you’re signing. Ask us anything on this checklist. A trustworthy lender will always have a clear answer.
Frequently Asked Questions About Business Funding Scams
How can I tell if a business loan offer is a scam?
The biggest red flags are being asked to pay before you receive funds, a “guaranteed” approval with no credit check, an offer you didn’t ask for, pressure to decide immediately, and requests for payment by gift card, wire transfer or cryptocurrency. If you see any of these, stop and verify the lender independently.
Is it normal to pay a fee before getting a business loan?
You should be very cautious. Legitimate lenders may charge fees, but they disclose them in a written offer and usually deduct them from the loan at funding. The FTC warns that a lender asking you to pay before you receive a promised loan is a red flag, and doing so over the phone is illegal under the Telemarketing Sales Rule.
Does the SBA call or email business owners about loans?
The SBA does contact borrowers, but official SBA emails come only from addresses ending in @sba.gov, and SBA staff never charge for help. If you’re unsure, contact the SBA directly through SBA.gov or its Answer Desk at 1-800-827-5722 rather than responding to the message.
Are free government grants for small businesses real?
Some are, but you have to apply for them, and the government doesn’t charge a fee to receive one. According to the BBB, anyone who contacts you out of the blue offering a grant, especially one that requires a “processing fee,” is likely a scammer. Search for federal grants at Grants.gov.
What is a confession of judgment, and should I sign one?
A confession of judgment is a contract clause that lets a funder get a court judgment against you if you default, without you having a chance to defend yourself. The FTC has cited misuse of these clauses in actions against small business funders. Read every contract carefully, ask whether one is included, and consider having an attorney review the agreement before you sign.
How do I check if a lender is legitimate?
Confirm the company’s address and phone number on your own, check whether it’s registered with your state attorney general or financial regulator, search for reviews and complaints, review its BBB profile, and make sure its email domain matches its official website. Get every term in writing before you sign.
Where do I report a business loan scam?
Report it to the FTC at ReportFraud.ftc.gov, to the SBA Office of Inspector General Hotline if it involved the SBA, to IdentityTheft.gov if your information was stolen, and to BBB Scam Tracker to warn other business owners. Contact your bank right away if you sent money or shared account details.
Sources
- Federal Trade Commission, What To Know About Advance-Fee Loans
- Federal Trade Commission, Fraudulent funders = big woes for small businesses
- Federal Trade Commission, Back to business #3: Looking for small business financing?
- U.S. Small Business Administration, Protect yourself from scams and fraud
- U.S. Small Business Administration, Stay Safe: Tips to Protect Your Business from Scams Targeting COVID Loan Borrowers
- Better Business Bureau, Scammers impersonate legitimate lenders to steal thousands of dollars
- Better Business Bureau, Be on the lookout for fake government grants
- Better Business Bureau, Watch out for “guaranteed” loans with upfront fees
- Better Business Bureau, Receive a call from a loan processing company? It could be a scam
This article is for general informational purposes only and is not financial, legal, or tax advice. Scam descriptions and guidance come from the FTC, SBA and BBB sources listed above, as of October 2026. If you believe you are the victim of fraud, contact your bank and the appropriate authorities right away. Loan terms, rates, and eligibility vary by lender and program and are subject to approval.