3 Things to Avoid When Searching for Grants for Small Businesses

Why Fraud in Grants for Small Businesses Is Prevalent and Who May Target?

Small business grants saw a surge in demand post-pandemic. Federal relief programs introduced millions of small business owners to the notion of non-repayable funding, and that awareness never went away. Fraudsters noticed.

Scammers today are impersonating federal agencies, using branding similar to programs such as the SBA small business grant initiative, and running paid ads targeting early-stage startups, minority-owned businesses and low-income entrepreneurs eligible for the real funding opportunities. The mimicry is good and the consequences are not trivial. Business owners lose money, leak sensitive data and waste time that could have been spent on a legitimate grant application.

Learning how these scams work is non-negotiable. That's a basic part of protecting any business. a basic part of protecting any business.

Here are three common scams that are found in grants for small businesses that you should be aware of:

1. Any Grant That Charges an Application Fee Is Not a Grant

This is the biggest trap. A business owner finds a promising grant opportunity online, clicks through, and is asked to pay an application fee, processing fee, or refundable deposit before the application is even considered. The fee sounds minor. The opportunity sounds big. That imbalance is the whole deal.

No legitimate and genuine grants for small businesses, whether federal or state or even private, would ask for a fee to apply. Moreover, no grants for small businesses by U.S. Small Business Administration require any kind of application fees. Even grants.gov does not have any application fees. Also, popular grants like the Amber Grant for women-owned businesses do not have such fees. In short, none of the grants for small businesses ever have any kind of application fees.

It is to be noted that deceptive or fraudulent fee demands can come in different forms like:

• Administrative processing fees: These are often under $50 and are framed as routine charges, making them seem trivial.

• Background check payments: These are presented as a legal requirement before funds are disbursed.

• Refundable deposit requests: Scammers will promise to pay it back after approval, but these charges are never returned.

• Grant insurance charges: No such requirements exist in any real grant program. In simple terms, these charges are entirely fabricated.

• Wire transfer or gift card payments: A clear sign of fraud is when scammers ask for wire transfers or gift card payments. No legitimate financial assistance programs will ever request these payments.

If a grant opportunity asks for money before they give you money, stop. Report it to the FTC at reportfraud.ftc.gov and move on.

2. Guaranteed Approval Is a Red Flag, Not a Feature

The reality of grants for small businesses is that they are all competitive and not easy to secure. There is no guarantee that even after submission, you will be able to secure one. Each genuine grant opportunity, like Small Business Innovation Research (SBIR) or an economic development initiative by the state government or even a private business development grant, comes with its own set of eligibility requirements, a separate review process and a very distinct eligible applicants. Hence, in this landscape, there can never be a guaranteed approval.

But scammers would try to convince you otherwise. They tend to use guaranteed approval language for one single reason: because it sells. This tactic is especially attractive to those businesses who have faced rejections with small business loans or are unable to meet the requirements of the lenders.

But, you can still fall for the trap. Here is what guaranteed approval scam usually looks like:

• Fake approval letters: They appear as official communication from the government, sometimes with logos similar to the U.S. Small Business Administration or federal agencies. They get there before any applications are filed.

• Countdown pressure: Words like only 3 spots left or ending funding Friday make business owners act before they read anything else. Real grant programs don’t create urgency. They advertise open application windows publicly.

• Impersonation of grants.gov or SBA branding: Fake sites duplicate the look of actual government websites. The URL is the tell. Official federal grant resources are on .gov domains. Everything else should be suspicious immediately.

No grant for small businesses guarantees approval. If one claims to, it is not a grant program.

Also Read: How to avoid small business loan scam

3. Fake Grant Ads on Social Media

Social media has emerged as the primary channel for distributing grant fraud. Because real startup business grants and federal programs are aimed at underserved communities, these scammers can easily serve fake grant ads directly to these groups using targeting capabilities on platforms like Facebook and Instagram. underserved communities, these scammers can easily serve fake grant ads directly to these groups using targeting capabilities on platforms like Facebook and Instagram.

These ads have become more sophisticated. Some masquerade as legitimate nonprofits. Others create new grant programs with names that sound real. And here’s how to read them critically:

There’s one rule that applies to most situations: If a grant ad cannot be traced to a verified source on a .gov site, a recognized nonprofit or a vetted database, treat it as fraudulent until proven otherwise.

How to Tell If a Grant for Small Businesses Is Actually Legitimate

The saying, "prevention is better than cure" can be applied when it comes to checking the legitimacy of grants for small businesses. And it is much more faster to confirm than to actually recover from a scam. The government has provided two great resources that cover the most of the legitimate grant opportunities that are available to small businesses across the country:

Grants.gov

If you are exploring federal grants for small businesses, including those administered by the SBA, federal agencies and programs like Small Business Technology Transfer (STTR) and SBIR, then you must verify their listings on grants.gov. The website lets users search by category, eligibility, and funding agency. If any grant says it is backed by the federal government, it should be listed on this website.

BBB Grants Jumpstart Database

The Better Business Bureau’s Grants Jumpstart database is a vetted directory of private and foundation-based business funding grants. It options specific to states like New York and local governments with active grant programs., entrepreneurship microgrants and business development programs across the country, including options specific to states like New York and local governments with active grant programs.

If you come across any grant for small businesses on social media, immediately check it against either of these databases in minutes before you take any action. If you ignore this step, you might be in danger of losing more money than you can afford.

Also Read: Local Business Loans and Grants

What a Legitimate Grant for Small Businesses Actually Looks Like

To make the difference between real and fake grant opportunities clear, here’s what to look for:

• Published on an official .gov site, verified nonprofit or foundation site
• Clear eligibility criteria including industry, location, business stage, revenue range
• No application fees of any kind
• Application portal needs to be an open and public one. Don't fall for a DM or a payment link
• Deadlines are set by award announcement dates. Check the official link for more info
• There should be contact information for a particular program office or an agency rep
• There should be a verifiable listing on grants.gov or the BBB Grants Jumpstart database

Small business development centers, affiliated with the U.S. Small Business Administration, also offer free technical assistance to assist business owners in identifying and applying for appropriate grant funding. They are a good first port of call.

Conclusion

Grants for small businesses are real. Federal grant programs, private foundations and nonprofit organizations combine to provide billions of dollars every year to eligible small business owners all across the country. That money is worth going after.

But we got to do the verification step. The BBB Grants Jumpstart database and Grants.gov are there to make this step easy. If you are a business owner and need capital faster than a grant timeline will allow, there are still options for you to consider in small business loans, working capital options and other financing programs.

The scam is dressed up as an opportunity. Knowing the difference protects the business and the business owner.