Business funding: check the lender before paying a fee

A funding promise is not a verified lender

A business short of cash may be especially tempted by a message saying money is already approved and only a small payment stands in the way. Before paying or sending financial records, separate the funding claim from the identity of the person making it.

The FTC describes advance-fee loan scams in which someone promises access to credit regardless of credit history, then demands a processing, insurance, or other fee first. There may be no lender and no loan. Pressure to act quickly does not make that promise more reliable.

Ask for the legal name of the company, whether it is the lender or an intermediary, and the name of the institution expected to provide the money. If an offer comes through a broker or matching service, ask who makes the credit decision and what the service does with your application. Clear answers are a starting point for verification, not proof by themselves.

Verify the company through an independent route

Do not use only the phone number or link in the pitch to check the pitch. FTC small-business phishing guidance recommends contacting a company through a number you know is correct. Find the institution's official website independently and confirm whether the person, application, and payment request belong to it.

If the company claims to be an FDIC-insured bank, FDIC recommends checking BankFind by bank name or website address and comparing the listed institution with the URL. Watch for misspelled domains or a bank name embedded inside someone else's web address. A bank's existence does not establish that a particular message came from it. A nonbank lender's absence from that bank directory does not, by itself, establish fraud.

The FTC also recommends checking registration with the relevant state banking or financial-services regulator or attorney general and searching the company name with terms such as complaint or scam. Ask the regulator which requirements apply to the particular lender or broker and product. Reviews and search results can provide leads, but neither a favorable review nor a lack of complaints authenticates the offer.

Distinguish a disclosed fee from a paid promise

Not every charge before funding is a scam. The FTC notes that real lenders may require an application or appraisal fee before considering a loan. The important distinction is that paying a fee does not legitimately guarantee that a loan will be made.

Ask what the fee covers, who receives it, when it is due, and whether any part is refundable if the application is denied or you withdraw. Obtain those terms in writing and verify the recipient separately before paying. A later demand for another payment to release supposedly approved funds deserves a fresh check, not automatic compliance.

Program rules matter too. SBA's 7(a) guidance says a lender may pass its upfront SBA guaranty fee to the borrower, but may not charge the borrower the lender's annual SBA service fee. Other lender and agent charges have their own rules. Have the lender explain each charge rather than assuming that a label containing SBA makes it permitted.

Do not let a logo authenticate the offer

SBA's fraud guidance warns that its logo on a webpage does not establish that the information is accurate or endorsed by SBA. It advises checking claims against information on the official SBA website. A claim to be an SBA representative is different from a private lender saying it offers an SBA-backed product.

SBA says it communicates from email addresses ending in @sba.gov. That is a warning check for someone claiming to be SBA itself, not a rule that every participating private lender must use a government email address. Verify apparent government correspondence independently too; a displayed sender name or copied logo can be misleading.

Before sharing sensitive records, confirm the application and recipient through the verified institution. FTC guidance explains that phishing messages can ask for business bank details or passwords and can imitate familiar companies. Do not send account passwords or one-time sign-in codes in response to an unsolicited funding message. Ask the verified lender how it securely collects the documents it actually needs.

If you already paid, act promptly

Contact the bank, card issuer, payment service, or other company used to send the money immediately. The FTC recommends reporting the fraudulent transaction and asking whether the payment can be reversed or refunded. Recovery depends on the payment and circumstances; reporting does not guarantee the money will return.

Keep the offer, correspondence, payment receipt, and account details needed to report what happened. If account credentials were exposed, change the affected passwords and enable two-factor authentication through the real account provider. If personal information was exposed, use the FTC's identity-theft guidance for the relevant recovery steps.

Report scams through the FTC's fraud-reporting service. Suspected fraud involving SBA programs can also be reported to SBA's Office of Inspector General. Pause further payments while checking the claim. Paying an additional fee to fix an unverified loan problem can increase the loss instead of unlocking funding.

This guide is educational and U.S.-focused. It does not take your individual circumstances into account. Check current terms, eligibility, and local rules with official sources and a qualified professional when needed.

Sources & further reading

Official sources referenced for this guide. Source pages may change after publication.