Avoiding SBA Loan Scams

What makes an economic disaster even darker is when scam artists use detrimental situations like this to their advantage.  It happened to victims of Hurricane Katrina with imposters claiming to be part of the government FEMA program, and now scammers are posing to be from the Small Business Administration offering loans. With the majority of loans and applications conducted online, it’s even easier to deceive a savvy business owner with a legitimate looking website, especially when there are many different types of disaster relief loans being offered through the government, private banks and business entities like QuickBooks and Square.  So how can you tell what loans are legitimate, versus SBA loan scams?

Agents Claiming to be the SBA

If an agent of the SBA calls you stating your business is eligible for a disaster loan, guaranteed to be approved and you never submitted an application on their government website, this is an imposter. The SBA doesn’t make unsolicited phone calls to give out loans, won’t guarantee any loan amount and won’t ask for your personal information over the phone like your full social security number in order to pull up a credit check. And, if they tell you, you can apply for the PPP funding (Paycheck Protection Plan), definitely be wary since those loans are no longer available.  For now, only existing PPP borrowers can apply for additional funds or for loan forgiveness. 

Check for SBA Email Addresses

In order to get emails from the SBA, you have to sign up on the government website and give permission to receive their latest information and programs.  If you didn’t take this step and start to find them in your inbox, offering or guaranteeing financial aid, be very cautious before clicking on any links or submitting information.  Scammers have almost perfected creating legitimate looking emails and websites using the same logos and wording.  Foreign hackers can be spotted if the wording reads too formal or you find weird grammar or incorrect punctuation. Another easy way to spot a fake is to check the last part of the email or website. An official SBA agent’s email will always end with @sba.gov.

Third Party Offers

As a business owner, you’ve probably received tons of emails and spam calls to apply for disaster relief or capital funding.  Some of these offers I’ve been receiving are from financial institutions that I bank with and know well. Others are from out-of-state lending companies that are flooding my inbox or leaving weekly voicemails.  While most of these solicitations are probably real businesses, the more aggressive they are, the more fees and interest rates they charge.  You should never pay up-front fees or high interest bridge loans with funding backed by the SBA.  Their website contains a chart of interest fees, lenders can legally charge depending on the type of loan and none were higher than 10 percent.  

If you are a victim of SBA loan scams

If you discover you’ve been a victim of SBA loan scams, there isn’t much you can do once those funds have been transferred.  Most of these con artists are out of the country and there’s little legal recourse.  When I first discovered I had been grossly overcharged for a service, I was able to call my bank to stop payment on a check that was still in transit.  But even then, my bank couldn’t guarantee they would be able to catch the check.  So, I transferred the majority of my business checking balance into my business savings.  Then, I had to cancel my overdraft protection since any check that didn’t clear, the bank would automatically use my savings to cover it.  It was a big hassle, but well worth not losing a few thousand dollars.

When you’re in a vulnerable position and feeling like your world is collapsing around you, it’s easy to be blind to the little red flag warnings.  Feeling desperate, I made a bad business decision over-paying a contractor because I didn’t take time to do my homework. Verifying licenses, corporate addresses, getting references, researching owner background and comparable costs online would have saved me a lot of frustration and money I can’t afford to lose.  This was a good reminder that spending the extra time to cross-check information from reliable sources such as the SBA, the Better Business Bureau and talking to bank representatives you trust, will be worth the effort and can save you from making an unfortunate business decision.

Sherry has been part of the interiorscape industry for over fifteen years, starting at an entry level job at North Florida's largest greenhouse and currently owning two horticulture companies. At UMaine, Sherry majored in English where she worked part-time writing scripts for a local college TV studio.

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