How to Avoid Grant Money Scams

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.