With nearly $400 billion on the line between the Economic Injury Disaster Loans (EIDL) and the Paycheck Protection Program (PPP), I guess it shouldn’t be a surprise that there would be fraudsters targeting small business owners during these already challenging times. Avoiding small business lending scams and fraud related to COVID-19 requires that you are diligent and on the lookout for grant fraud, loan fraud, and phishing scams.
Scams and Fraud Schemes to Be Aware Of
The SBA offers some guidance regarding how they work and what activities should throw up a red flag warning you that you should suspect fraud.
Grant Fraud Schemes
- The SBA does not contact individual businesses on either 7(a) loans or disaster loans or grants. If anyone contacts you claiming to be the SBA, suspect fraud. Don’t share any personal or business information with them.
Loan Fraud Schemes
- If you are contacted by anyone promising you an SBA loan approval, but requires payment up front or offers a high-interest bridge loan in the interim, suspect fraud. The SBA does not guarantee approval before an application is submitted and reviewed.
- Any attempt to charge a borrower fees in excess of 3% is likely fraud. The SBA limits fees a broker can charge to 3% for loans of $50,000 or less and 2% for loans of $50,000 to $1 million. Loans over $1 million will include an additional ¼% or 2-¼%.
- If you are in the process of applying for an SBA loan and receive an email asking for Personally Identifiable Information (PII), make sure the referenced application number is consistent with the actual application number.
- Don’t assume that something with the SBA logo must be legit. These phishing attacks may be attempts to obtain you PII to gain access to your bank accounts or to install ransomware/malware on your computer.
- Make sure any email correspondence claiming to be from the SBA is from the SBA. Every email from the SBA will come from accounts ending in sba.gov.
- The presence of the SBA logo on a webpage does not guarantee it is endorsed by the SBA. Verify and cross-reference any information you receive with information available at www.sba.gov.
Reporting Suspected Small Business Lending Scams and Fraud
As we learn more about ne’er-do-well’s efforts to defraud small businesses in these challenging times, we’ll continue to update you on what you need to be aware of. Unfortunately, we advise you to look at anything that seems too good to be true with a skeptical eye—the potential for business lending scams and fraud related to COVID-19 can’t be ignored. As the situation changes over the coming weeks and month, we promise to be as accurate and candid as possible with the information we share at Nav.com to help you make informed decisions about your options as you consider financing to help you weather the coronavirus storm.
Please report any suspected fraud to the SBA’s Office of the Inspector General. You can report your concerns via email HERE, or by telephone at 800-767-0385.
Please keep in mind this information is changing rapidly and is based on our current understanding of the programs. It can and likely will change. Although we will be monitoring and updating this as new information becomes available, please do not rely solely on this for your financial decisions. We encourage you to consult with your lawyers, CPAs and Financial Advisors. To review your real-time funding options with one of Nav’s lending experts, please contact us.
This article was originally written on April 1, 2020 and updated on April 6, 2020.