Scammers launch small business frauds to take advantage of local businesses of all kinds. When small business owners are taken in, they can find themselves being ripped off for hundreds, if not thousands, of dollars. Here’s a guide to common frauds and how to protect your business from them.
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Small business fraud, explained
Many small businesses rightfully prefer to focus on what they do best: providing excellent products or services to their customers. Being aware of how con artists target businesses, however, is crucial to detecting and combating fraud. That’s why business leaders need to dedicate substantial time and resources to fraud prevention.
Most fraudulent activity targeting small businesses involves some form of impersonation.
Loan fraud and other common scams
One common racket is loan fraud. Imposters sometimes pose as the Small Business Administration (SBA) and require businesses to pay fees to apply for SBA loans or grants that never arrive.
Thieves may also masquerade as a regulatory body or some other authority and threaten to pursue legal action if you fail to pay a fake fee. Alternatively, they sometimes threaten to revoke your business license or try to convince you that your patents or patent applications will expire if you don’t pay up.
Criminals may also pretend to be one of your business partners, such as a trusted distributor or source, and send you a fake bill. They’re hoping you’ll pay the invoice without scrutinizing it.
In addition, some will call and offer you something for “free” — such as a listing in a directory that doesn’t exist or compliance posters from the U.S. Department of Labor that the government would gladly send you for free — and then try to shake you down for payment later.
Malicious actors may even try to convince you that they’re an overpaying customer — the large check they sent you is actually bad, but you and your bank won’t discover that until you have sent them a payment to make up the difference.
Believe it or not, these are just a few examples. Thieves target small businesses not only because they are profitable enterprises but also because they are a source of sensitive information.
Major fraud risks: Phishing and identity theft
When fraudsters can trick you into sharing sensitive information with them, they can potentially steal your identity or that of your employees or customers. This is the purpose of phishing scams, in which criminals send emails, texts, or messages through social media platforms to you and your team.
These communications may include links that lead to fake websites or that download malware onto your device. They are also designed to trick people into handing over their personal information at financial institutions, such as their credit card or checking account numbers.
To manage risk and help prevent fraud, always keep an eye out for the possibility of deception.
Red flags that indicate a scammer
While poor grammar and spelling have long been trademarks of a ruse, thieves are becoming increasingly sophisticated. Therefore, don’t base your judgment solely on the quality of the communication.
Listen to your gut. If something seems too good to be true, then chances are it is. If someone is trying to part you from your money or personal information using fear, threats, or a sense of urgency, those are also red flags.
How to protect your business
Instead of continuing to engage with someone who may be a criminal, pause and take a breather. Find the official phone number for the organization they claim to represent and call to verify their authenticity. Never move forward without double-checking.
Likewise, create strong internal controls. Explain the common types of grifts to your employees and instruct them not to click on links. In addition, train your team members never to believe texts from unknown numbers, even if they claim to be the CEO.
For the best fraud control, designate someone tech-savvy on your team as your go-to anti-fraud person and have staff forward any suspicious emails or other messages to them for vetting. Larger organizations even have dedicated teams that work to shore up vulnerabilities.
If it ever turns out that you do find yourself dealing with bad actors, then it’s time not only to extricate yourself as soon as possible but also to report the plot so others won’t fall prey to it.
How to report fraud
The Better Business Bureau (BBB) not only provides a database of criminals’ ploys but also a handy online portal through which reports can be submitted. If you’ve discovered a fake or malicious website, then Google also wants to know. Their online form enables users to report spam, malware, or phishing.
If you believe your identity has been stolen, then file a report with the Federal Trade Commission. Submitting the SBA’s Declaration of Identity Theft form is also necessary if someone pretended to be you and took out certain government loans in your name.
Make 2025 an anti-fraud year
Con artists, thieves, and tricksters are always innovating, trying to come up with their next scam. For this reason, it’s essential for small business owners to stay informed about the latest developments. Make a point of reading the Federal Trade Commission (FTC) Scam Alerts page on a regular basis. Other great resources include the free notifications from the Cybersecurity & Infrastructure Security Agency (CISA) and the Better Business Bureau (BBB) scam tracker.
With the right attitude and safeguards in place, you can shield your business information and keep unwanted third parties from dipping their hand into your pocket.
