How to Determine if You Have a Small Business Grant Scam

As you launch and grow your business, you’ll likely need additional funds at some point to help you achieve your goals. In addition to small business loans, you can also explore grants to meet your funding needs.

In this overview, you’ll learn the basics of grant funding for small businesses – including how to tell when an opportunity may be a grant scam, and steps you can take if you fall victim to one.

What are business grants?

Legitimate small business grants can be a huge win – unlike loans, they provide funds that support your business, but you don’t need to repay them. Small business grants can come from a variety of sources, like governments, corporations, non-profit foundations, and other donors.

Unfortunately, sophisticated grant scams are rampant today, and opportunistic scammers prey on small business owners in need of funding. This is especially true for startup businesses and minority-owned and women-owned businesses because they often have financing concerns, perceptions, or experiences that will make it harder for them to get approved for small business loans.

How to tell grant scams from legitimate opportunities

As the sophistication of online fraud increases, it’s becoming increasingly more difficult to tell true opportunities from scams.

The first thing to know about small business grants is that they’re relatively rare. Most are directed to target entrepreneurial groups, such as small businesses in a specific geographic region or industry, or owned by minority, veteran, or women entrepreneurs. Another key point is that they’re highly competitive – only a small fraction of applicants receive grants. Still, it’s worth applying if you meet the criteria for a legitimate grant opportunity.

To protect you through the application process, look out for these common scams and tactics:

• Phishing and fake grant opportunities: Today, it’s not enough to see a trusted organization’s name attached to an email or other grant announcement. That’s because sophisticated scams use fake emails or websites that mimic legitimate grant agencies and businesses to steal information.
  
  To protect yourself and your business, if you’re notified of an opportunity, it’s best to contact the funder directly to confirm that it’s real. Find contact information through an independent online search because the information you get from the grant announcement could lead directly to the scammer.
  
• “Too good to be true” offers: Because of the competitive nature of grants, none are pre-approved or guaranteed. However, scammers will often promise large sums of money with little-to-no effort – a key sign of fraud.
  
• Pressure tactics: Scammers use pressure tactics, such as urgent or limited-time offers, to push you into applying before getting the chance to thoroughly research the opportunity or funder.
  
• Requiring upfront fees or payments: Legitimate grant opportunities won’t require any upfront fees. If a “funder” does, then it’s likely a scam. By paying this fee, they would not only get your payment, they could also get access to your account information.
  
• Unsolicited communications: Unsolicited emails (especially those with links or attachments), phone calls, texts, or social media messages offering grant opportunities can be a red flag, especially if they come from unfamiliar funding sources. Be very careful before opening or responding to these.
  
• Insufficient information or transparency: Fraudulent grant scams often give vague or little information about the organization, terms, or grant process. This is a red flag that the scammers only want your information and access to your accounts.

When protecting your business and personal information against common scams, you’re always better off safe than sorry.

What to do if you applied for a scam grant

In today’s interconnected online world, even international corporations with enormous cybersecurity teams are getting hacked, so it’s no surprise that many small businesses also fall prey to scams.

If you think that your business may have been compromised, here are steps that you can take:

1. Immediately stop communicating with the scammer: As soon as you suspect you’ve been scammed, stop all communication. Scammers often try to extract more money or sensitive information, as well as use threats. Cutting off contact immediately is the first line of defense.
   
2. Report the scam: You can report this to several agencies, including the Federal Trade Commission (FTC), the Better Business Bureau (BBB), your state’s consumer protection agency (if one is available), and any local authorities.
   
3. Contact your bank or credit card companies: If you gave financial details or made payments to the scammer, contact your bank or credit card company immediately and explain the situation. You may need to cancel any credit cards or bank accounts compromised by the scam, but the bank may also be able to reverse unauthorized charges or halt further transactions.
   
4. Protect your identity: If the scammer accessed sensitive business or personal information, contact the major credit bureaus – including Experian, TransUnion, and Equifax – to discuss potential options, like a credit freeze. Then, request your free credit reports and monitor your credit history regularly. Also, be sure to report this to the FTC’s Identity Theft website – this may help you down the road if you need additional documentation to recover funds.
   
5. Seek legal support: If the scam has caused significant financial harm, you may want to consult with an attorney experienced in fraud cases. They can advise you on how to recover lost funds or take legal action against the scammers.

Undoing the work of cybercriminals and scam artists can be tough on people and businesses. As you move forward, look for advice on how to best protect yourself from these challenges. This could include additional cybersecurity measures to protect against fraudulent messages or identity theft insurance that can protect your business and personal assets from harm or loss.

Pursuit can help

Every day, Pursuit helps small business owners get the financing you need with great terms that help support and build your business and guide you on a path to success.

Our loans and line of credit are an excellent alternative to grants and we’re approved by the U.S. Small Business Administration (SBA) to help small businesses in New York, New Jersey, Pennsylvania, Connecticut, Nevada, Illinois, and Washington. We offer loans and a line of credit for working capital, commercial real estate, equipment, and more to cover any small business need.

Contact us today to learn more.