Business loan scams and how to avoid them

What is an advance fee scam?

An advance fee scam tells you that your loan is approved and that you need to pay something first: an insurance premium, a processing fee, a first month's payment, a good faith deposit, or taxes. The fee is often requested by wire, gift card, cryptocurrency or a payment app, and the loan never funds.

Legitimate lenders deduct their fees from the loan proceeds at funding or charge them at closing on a disclosed term sheet. The only money you may pay before funding is for third party work such as an appraisal on a property, paid to the provider. How brokers get paid explains which fees are normal.

Why is guaranteed approval always a warning sign?

No lender can guarantee approval before underwriting, because underwriting is the decision. A promise of guaranteed approval, approval with no credit check for a large amount, or a specific amount before anyone has seen your bank statements is either a scam or a bait offer that will change once you are committed. Real lenders say you may qualify and give ranges.

Related warning signs are a rate far below the typical range for your profile, a lender that contacts you first by text or robocall, and an offer that requires no documents. Compare any offer with the ranges in business loan rates explained. Approval is never guaranteed by anyone, including us.

How do scammers use pressure?

Pressure is the tool that makes the other scams work. You are told the offer expires today, that the rate goes up tomorrow, or that your file will be closed unless you pay now. Some send fake documents on official looking letterhead.

Legitimate lenders give you time. A real term sheet is typically valid for 30 to 60 days, and a real lender is fine with you reading it and showing it to your accountant. If you feel pushed to decide in minutes, stop and verify. How to read a term sheet gives you the questions to ask.

How do fake lenders use real lender names?

Scammers copy the names, logos and even staff names of real banks and online lenders, then set up a lookalike website, email domain or phone number. You search for the lender, find a good reputation, and assume the person emailing you is from it. The giveaways are a domain slightly different from the real one, an email from a free provider, and a phone number that does not match the official site.

Verify by going to the lender's official website yourself, not through a link you were sent, and calling the number listed there to confirm the person and the offer. Real lenders will confirm or deny in one call.

How do you verify a lender or broker?

Check five things. The business is registered with its state or province, which you can confirm on the corporate registry website. The website domain, email domain and phone number all match. There is a physical address. There is no fee to see an offer. And the terms are in writing on a term sheet that names the lender, the amount, the cost, the fees and the guarantee.

Also check the Consumer Financial Protection Bureau and Better Business Bureau records, and ask any broker how they are paid. Broker versus direct lender covers what a good broker does, and how we make money shows how this site is paid.

What should you do if you have been targeted?

Stop all contact and do not send more money, even if you are told a final payment will release the funds; it will not. Report it to the Federal Trade Commission or, in Canada, the Canadian Anti Fraud Centre. If you sent money, call your bank or the payment provider immediately; payments can sometimes be reversed if you act within hours. If you sent documents, alert your bank and consider a credit freeze.

Then apply through a source you have verified. On this site offers come back with the lender named and the terms in writing, and your business pays nothing. You can also ask your AI assistant to apply for you through our MCP server; see the agents hub.