Small Business Grant Scams: Red Flags Every Owner Should Know

Every few weeks, someone shows me a message on their phone and asks, "Is this real?"

Usually it's a direct message on Instagram or Facebook. Sometimes it's a text, sometimes an email with a government-looking logo. The message says the business qualifies for a grant — $10,000, $25,000, sometimes more. All they have to do is pay a small fee to process the application.

It's never real. And the people it targets are almost always the same: owners who are under financial pressure, new to how funding works in the U.S., or already turned down by a bank. In other words, the exact owners I work with every day.

Here's what these scams look like, how to spot them, and what to do instead.

Why grant scams work so well

Grant scams succeed because they sell the one thing every struggling owner wants to hear: free money, no repayment, no credit check.

They also exploit a real gap in information. Most owners don't know that the SBA itself does not provide grants for starting or expanding a business. If you believe there's a big pool of government money waiting for small businesses, someone offering to help you "access" it sounds reasonable.

We cover what real grants exist — and how narrow they are — in our guide to whether the SBA gives grants. The short version: real grants are rare, competitive, and never guaranteed. Anyone promising otherwise is selling something.

The red flags

If you see any one of these, stop. If you see two, you're looking at a scam.

1. The grant is "guaranteed"

No legitimate grant program guarantees funding. Real grants have eligibility rules, competitive review, and limited money. The FTC puts it simply: honest businesses never guarantee that you'll get a grant or a loan.

2. You have to pay to apply, process, or "unlock" funds

Searching and applying for federal grants on Grants.gov is free. Registering a business in SAM.gov, the federal system used for grants and contracts, is also free. Government programs don't charge an application fee, a "processing fee," or a "release fee." If money has to go out before money comes in, it's not a grant.

3. The offer came to you through social media, text, or a cold call

Real grant programs don't find you in your DMs. Government agencies don't send unsolicited messages telling you that you've been "selected." The SBA itself warns that it only contacts people from email addresses ending in @sba.gov — anything else claiming to be the SBA should be treated as fraud.

4. The pitch targets your identity

Scams often say a grant is reserved for minority-owned, women-owned, veteran-owned, or immigrant-owned businesses, and that you automatically qualify. Some real programs do focus on specific communities, but none of them guarantee money to everyone in a group.

5. The deadline is urgent

"Only 3 spots left." "Offer expires tonight." Pressure to decide quickly is designed to stop you from checking. Real application windows are published in advance, and a legitimate program won't punish you for taking a day to verify it.

6. They want sensitive information up front

Be very careful about sharing your Social Security number, bank login, or card details with anyone who contacted you first. A real program will tell you exactly what it needs and why, through an official application — not through a chat window.

7. "Money-back guarantee" and testimonials from influencers

A refund promise and a feed full of happy winners make a scam look safe. Both are easy to fake, and by the time you try to get your money back, the company may be gone.

A real case: Grant Bae

In 2022, the Federal Trade Commission and the State of Florida went to court against a Florida company called Grant Bae. According to the FTC's announcement, the company marketed grant-writing services to minority-owned small businesses during the pandemic, mainly through Facebook, Instagram, and Clubhouse.

The complaint alleged that the company:

• told customers that any minority-owned business that paid would receive at least $25,000 in grant funding;
• claimed to have access to hundreds of millions of dollars in grant money that didn't exist;
• sold service packages tied to "guaranteed" grant amounts, depending on how much the customer paid; and
• didn't deliver the promised refunds when the grants never came.

According to the FTC's consumer alert on the case, many owners lost thousands of dollars each, and by the time they realized what had happened, it was often too late to dispute the charges.

Look at that case against the red flags above: guaranteed amounts, pay-to-play fees, identity-based targeting, social media marketing, a money-back promise. Almost every warning sign in one place. That's typical.

How to verify a grant before you do anything

Before you pay anyone, share any documents, or fill out a form, check the offer against sources that can't be faked:

• Federal grants: search the program on Grants.gov. If it isn't listed there or on the funding agency's own .gov website, be suspicious.
• SBA programs: go to sba.gov directly — don't click the link in the message.
• State or local grants: look for the program on your state or city's official .gov website, or call your local economic development office.
• Private grants: look up the organization independently. A real foundation or company program will have a public page, clear rules, and published winners.
• Ask an advisor. Your local Small Business Development Center, SCORE chapter, or Women's Business Center will tell you for free whether a program is real. We compare those options in our guide to free small business help.

If you still aren't sure, don't pay. A legitimate grant will still be there tomorrow.

If you've already paid

It happens to careful people. If you think you've been scammed:

1. Contact your bank or card issuer right away. Ask whether you can dispute the charge or stop further payments. Speed matters here.
2. Report it to the FTC at ReportFraud.ftc.gov. Reports help build cases like Grant Bae.
3. If someone impersonated the SBA, report it to the SBA's Office of Inspector General.
4. Watch your accounts and credit. If you shared your SSN or bank details, consider a fraud alert or credit freeze.
5. Be wary of "recovery" services. People who were scammed once are often targeted again by companies promising to get the money back — for a fee.

The better path

The hardest part of my job isn't explaining that a grant offer is fake. It's what comes next, when the owner asks, "So where do I get the money?"

For most owners, the honest answer is a small loan from a lender that works with businesses like theirs — often a CDFI or a microlender, not a bank. If you're weighing those options, start with our comparison of SBA loans and CDFI loans. If your business is young, read how lenders look at businesses under one year old. And if timing matters, see how long business loan approval takes so you can plan instead of panic.

None of that is as exciting as a $25,000 grant in your inbox. But it's real, and it won't cost you a fee to find out where you stand.

Ready to see where your business stands? Try PreCap Logic free at getprecap.com — no signup required.