Many Americans – over 50 million, according to one source – lose money to online scams every year. In 2020, 2.2 million Americans reported themselves victims of scams that lost them more than $3.3 billion.
One form of fraud that affects small business owners is the grant money scam. Grant fraud is especially insidious as it targets businesses at their most vulnerable, early stages.
In this post, we’ll help you detect and avoid some of the most common forms of this counterfeit activity. We’ll also tell you how to report government grant scams and protect your assets.
What Is a Grant Money Scam?
Small businesses rely on government grants to help get them started and expand in their first few months or years. As helpful as grants are – especially since they don’t need to be repaid like loans – approval for one takes a lot of patience and steps. The process is not automatic, and there are no shortcuts.
Still, many small businesses fall victim to hucksters who prey on them online, especially via email. They claim to offer fast-tracked government grants without the hassle. They entice business owners to give up their Social Security numbers, bank account information, Employer Identification Numbers (EINs), and other personal or business information in exchange for instant cash.
Instead, grant scammers use private information to commit identity theft. They open credit accounts, take out loans, or make other financial transactions under your name. Some promise grants for a one-time “application fee” that victims instantly forward to them. Needless to say, there was never a grant in the first place.
Common Grant Money Scams
Grant scammers employ many methods and pretenses to con your small business for information and money. Some of the most common ways include the following:
Social Media Alerts
Grant scams are especially prevalent on Facebook, where fraudulent parties posing as friends send messages to unsuspecting business owners offering government grant opportunities. These messages try to redirect users to sites like GoFreeGovernmentMoney dot com. Even just clicking on that site can expose users to phishing – following through with the “application” can result in total disaster.
Notices from “Government Agencies”
If you’ve ever gotten an email from an “official” governmental organization – especially something like “The Federal Grants Commission” – you may have been tempted to think it’s legitimate just from the authoritative-sounding group name. It’s safe to assume it’s a fake.
A real government agency will never proactively email grant opportunities without an inquiry from you first.
Requests for Personal and Financial Information
“A special grant in your name is ready for you to claim! Just send us your Social Security number, home address, and bank account information!” By now, this kind of naked come-on should be easily recognized as a scam, but even today, millions of Americans still fall for these scams.
Requests for Money to Apply or Release Grant Funds
Similarly, it’s amazing how many innocent people are willing to part with cash to a previously unknown entity. Anytime you get correspondence offering grant money in exchange for a one-time application fee or “release authorization charge,” it’s a scam.
Again, no government grant agency will contact you out of the blue or ask for money upfront.
Phone Calls and Robocalls
Grant scammers also get to their victims over the phone. They pose as federal employees and set their location as Washington, D.C., so you’ll think they’re legit just from the caller ID. They might also employ robocalls, which should arouse suspicion in any situation, including federal grant offers.
6 Ways to Determine Whether a Grant Is a Scam
Thankfully, there are a few easy-to-recognize signs that you're being targeted by federal grant scammers. Here are six of them.
They Contact You First
The mere fact that someone is contacting you about a federal grant without your having applied for it is a foolproof sign that they’re scamming you. No governmental agency makes first contact with you about grants. You have to make inquiries first.
The Agency Is Not on the Federal Grant Givers List
Only a few federal agencies issue grants to small businesses, and you can see them all at grants.gov. If the “agency” getting in touch with you is not on that list, it’s likely a fake.
They Make Bold Promises and Use Buzzy Phrases
The federal government does not “sell” grants. They don’t try to entice you to apply for them. So if you receive a message containing phrases straight from TV ads – “You are eligible for a free federal grant!”, “The U.S. Grant Commission Board has authorized a $10,000 grant in your name!” – it’s a scam.
Their Email Address Is Odd
One of the surest ways to detect a scammer attacking your inbox is to check the email header. Oftentimes, a legitimate-looking email address in the "From:" field will come from a different source than the email header shows.
If there's any discrepancy – or even if the email address just looks strange – it’s likely a phishing expedition.
They Ask You for Money
Be vigilant with any organization or business that asks you to pay for something upfront. Application fees or “authorization release funds” are not part of the legitimate federal grant application process.
They Sound Urgent
Real grant applications typically take a long time to process. If you’re hounded by a party who’s urging you to “act now” or says things like “available for a limited time only,” the grant they offer is probably not real.
How to Report Government Grant Scams
If you feel you’re besieged by federal grant fraudsters – or worse, you’ve fallen victim to them already – there are a few steps you can take to help protect yourself and others. Here are the ways to report government grant scams.
Contact the Federal Trade Commission
File an online report with the FTC or call them at 877-382-4357.
File a Complaint with the FBI for Online Fraud
If the grant scammers got to you via email or social media, issue a complaint with the FBI’s Internet Crime Center.
Call Your State’s Attorney General
Along with the feds, your state government may be able to help with recourse for grant scams. Find your state’s attorney general and let them know.
Contact Your Bank and Credit Bureaus
Especially if you’ve given personal account information to a grant scammer, get in touch with your bank to put a fraud alert on your affected accounts. Do the same with all three credit reporting agencies: Experian, Equifax, and TransUnion.
Where Can You Find Legitimate Grants?
There are plenty of federal, state, and local government grants to be found. You just have to do the looking yourself – remember, they will never come looking for you. Check out online resources like:
Stay Alert About Grant Money Scams
Scammers have always been a blight on the economic landscape, and the online age has only made their jobs easier. Stay on top of federal grant scams to protect your business from ruin.