Finding funds to kickstart or grow your small business can definitely be challenging. That said, there are some fantastic options out there.
Just look at business grants, which provide access to funds with little or no repayment required.
The problem? Unfortunately, there are many scammers looking to exploit small business owners in need. These fraudsters often pose as government officials or lenders, offering “free money” in exchange for your personal information and/or hard-earned savings.
In this article, we’ll give you the resources you need to empower yourself as a small business owner—including learning how to spot red flags and dealing with grant scams, while staying focused on achieving your dreams.
Grants: A Special Kind of Funding
The term “funding” basically refers to any financial help a business or individual receives. Funding can take many forms, such as loans, investments, crowdfunding, or grants.
While funding comes from various sources, most types come from private investors and sectors.
Meanwhile, small business grants are usually offered by government or nonprofit organizations.
Unlike other forms of funding, you usually don’t have to pay back grants—which makes them a fantastic opportunity for your business, if you qualify. Also, grant applications don’t require credit checks since there’s no expectation of repayment.
That said, you do need to follow specific rules on how to use grant funds. If you don’t, you might have to pay it back, sometimes with interest.
Moreover, if you need cash quickly, everything that isn’t a grant is usually faster. For instance, some small business lenders can approve funds the same day.
Conversely, grants can take up to six months for a decision. That’s because the business grant application process is rather time-consuming. Just look at the federal government’s grant lifecycle, which involves many steps between announcing the grant and closing each one out.
In other words, getting a business grant requires a lot of patience, plus quite a bit of work on your part to apply. On the plus side, if you meet the criteria, being eligible for those funds can open up incredible opportunities for growing your business.
However, as good of an opportunity grants are, remember to always stay cautious—unfortunately, offers that seem too good to be true are often just that.
The Rise of Grant Scams Targeting SMBs
According to the Federal Trade Commission (FTC), Americans lost $10 billion to scams in 2023, up from about $9 billion in 2022. Imposter scams, which include government grant scams, were the top fraud category.
In fact, government grant scams have become a serious problem in recent years. Since 2020, the FTC has received almost 4,500 reports of government grant-related scams—with more and more people falling prey.
Especially worrying is the percentage of people losing money, which jumped to 37.5% this year, up from 28.5% in 2020. Plus, the dollar amount has more than doubled in the last five years, with people reporting a median loss of $1,500 in 2024.
Scammers also frequently target minority and underserved communities, knowing that business owners in these groups face unique challenges, including:
- Limited access to financial resources, professional networks, and mentorship.
- Unfamiliarity with legitimate funding processes.
- Language barriers that hinder business owners’ understanding of intentionally misleading information.
Scammers tailor their messaging to specifically target minority small business owners.
For example, in 2022, the grant-writing company Grant Bae promised that any minority-owned business that paid for its consulting services would receive at least $25,000 in grant funding—potentially even $250,000 if they paid more.
Unfortunately, those claims turned out to be false, leaving businesses out thousands of dollars. The company was eventually (and thankfully) shut down by the FTC. Unfortunately, small businesses had already taken significant damage.
Red Flags: How to Spot a Business Grant Scam
Business grants, like many other forms of funding, might sometimes sound tempting beyond belief. Whenever you’re on the lookout for new funding opportunities to grow your business, make sure to spot possible scams.
Below, we share several red flags that signal a scam, as well as the usual tactics that scammers rely on.
Unsolicited Communications and Guaranteed Approval
Be wary of random emails, phone calls, or social media messages claiming you’ve been approved for a grant—especially if you never applied for one. As mentioned above, “free money” isn’t that easy to come by, and grants never offer quick funding with no application process.
Contact Through a “Friend”
Scammers often take advantage of your trust in others. One popular tactic involves hacking a friend’s social media account and sending you a message, claiming they’ve received a free government grant and encouraging you to apply.
Spoofed Websites
Scammers can create fake sites that look like official government pages to lure those seeking business financing. These sites may promote special access to funding programs, use government logos, and claim to represent real or non-existent agencies. Through this strategy (known as spoofing) Scammers encourage you to share personal information through these fake sites.
Lack of Information and Transparency
Fraudulent grant scams often offer little to no information about their organization—including their physical address, as well as unclear details about their terms and grant process. Real scams must provide all necessary information, as well as contact details.
High-Pressure Tactics
Scammers often create a sense of urgency, such as “limited time offers,” to push small business owners into making hasty, uninformed decisions. Fraudsters may also attempt to rush you through the process, seeking your information while avoiding your questions.
Request for Personal Information
Imposters often demand personal information upfront, like your Social Security number, to determine your grant eligibility. They may also request bank account details or ask you to open a new business bank account to deposit (fake) grant money. Real grants are always very clear as to when and how they will request your information.
Upfront Fees
No legitimate grant organization will ask for money upfront. So steer clear of scammers who demand fees for business grant lists or applications—especially if they request payment through email transfers, money services, prepaid cards, or cryptocurrency.
Ultimately, business grant scammers aim to appear convincing by promising large sums of money with minimal effort. They may even offer a money-back guarantee. But as the old saying goes, if an offer seems too good to be true, it probably is.
What To Do if You’ve Been Scammed
If you believe you’ve been scammed—or even just have a nagging feeling you’ve been swindled—it’s crucial to take quick action. Here are a few steps you can follow to protect yourself.
Stop All Contact Immediately
As soon as you suspect you’ve been scammed, stop all communication with the scammer. Scammers will often try to extract more money or sensitive information, so cutting off contact immediately is your first line of defense.
Report the Scam
Reporting to the authorities does not necessarily guarantee you’ll get any money back that you’ve lost. However, doing so can help with investigations and protect other small business owners from being targeted.
- File a complaint online with the Federal Trade Commission (FTC). Their website will share your report with law enforcement to aid investigations.
- Contact the Better Business Bureau (BBB). On its Scam Tracker website, the BBB allows you to report a scam and search its database to see if similar scams have been reported.
- Notify your state consumer protection office. The U.S. government website has a handy search feature to help you find the nearest agency that handles fraud reports.
- Tell the local police. Especially in cases of identity theft or a major financial loss, reporting the scam creates an official record that can be helpful if you need to take legal action later.
Remember, the sooner you act, the better.
Contact Your Bank or Credit Card Company
If you shared financial details or paid a scammer, contact your bank and/or credit card company immediately—you may need to cancel compromised accounts. If you used gift cards, money transfers or crypto, notify those services as well. Doing so may help reverse unauthorized charges or stop further transactions.
Protect Your Identity
If the scammer has obtained sensitive personal or business information, take steps to safeguard your identity.
- File an identity theft report with the FTC. Provide details of the incident, and they will create a personalized recovery plan to assist you.
- Freeze your credit. If you suspect identity theft, a credit freeze can help protect you from fraud by blocking scammers from accessing your credit and opening fake accounts. Agencies must freeze your credit report within one business day of your request, and you can easily unfreeze it within an hour. Contact Equifax, Experian, and TransUnion to get started.
- Monitor your credit. Regularly monitoring your credit is an important part of managing your finances. Federal law entitles you to a free weekly copy of your credit report from each of the major credit reporting companies.
Scammers aren’t necessarily after your money. They can do a lot of damage with your personal information, so make sure to safeguard it.
Seek Legal Help
If you’ve experienced significant financial loss as a result of a grant scam, consider consulting an attorney, particularly one with experience in fraud cases. They can guide you on recovering lost funds or taking legal action against the scammers.
Finding Legitimate Grant Opportunities
The good news is that there are plenty of genuine grant programs available to help small businesses. The key is knowing how to spot the real ones from the scams.
Just to emphasize—if you receive any unexpected or random contact promising you a grant, it’s likely a scam. So, to find legitimate grants, you’ll need to take the initiative and do your own research, rather than waiting for someone to reach out to you.
Meanwhile, don’t just accept grant program websites at face value. Make sure to research all organizations offering grants by checking their official website, verifying their contact information, and reading reviews.
You can also double-check the legitimacy of business grant programs by consulting:
- Trusted governmental agencies like Small Business Development Centers, the U.S. Small Business Administration, and Minority Business Development Agency.
- Nonprofit organizations and community development financial institutions (CDFIs).
- Verified grant databases like grants.gov.
Lastly, don’t skip the fine print. It’s really important to review and understand all terms and conditions carefully before you accept any grant offer. In particular, pay close attention to any unclear or suspiciously simple requirements. And if something feels off, trust your instincts.
uLink Empowers Your Business Journey
It’s truly an exciting time to be a business owner. Whether you’re turning a passion project into a full-fledged venture or just starting out, there are plenty of business grant opportunities to support you.
However, it’s important to stay vigilant—as we’ve outlined above, there are those who seek to exploit hard-working entrepreneurs for their own gain through grant scams.
At uLink, we want to see you thrive. That’s why we’re committed to educating small business owners and boosting your financial literacy so you can recognize—and overcome—potential threats to your success. We’re also dedicated to connecting your small business to the global market, making international payments as seamless as possible. Discover more about how we can help you on your journey.
