Protect Your Business from Loan Scams: 5 Security Checks

Applying for a business loan can be stressful, especially if you're a small business owner trying to secure funding. Scammers take advantage of this urgency by setting up fake lenders, phishing for personal information, or tricking you into paying hidden fees.

To protect yourself and your business, follow these five essential checks before submitting a loan application.

5 Security Checks to Avoid Loan Scams and Protect Your Business

Scammers often target small business owners seeking loans, using fraudulent offers to steal money or personal information. Before applying for a loan, follow these five essential checks to verify lenders, spot red flags, and protect your business from fraud.

1. Verify the Lender's Legitimacy

Before applying for a loan, take the time to research the lender. A legitimate lender will have a physical address, a professional website, and clear contact details—not just a form or generic email.

A major red flag is if a lender contacts you first, pressures you to act quickly, or avoids giving details about their business.

How to Check the Lender's Registration and Licensing

Legitimate lenders are registered with financial authorities in their country. In the U.S., for example, lenders should be registered with the Federal Trade Commission (FTC) or the Consumer Financial Protection Bureau (CFPB). You can verify this by checking the official websites of these organizations or looking up the lender's name in state financial regulatory databases.

For businesses in the U.K., lenders must be registered with the Financial Conduct Authority (FCA). If a lender isn't listed on these official websites, it's a major red flag.

2. Watch Out for Upfront Fees or Lenders Who Skip Credit Checks

Legitimate lenders always assess your financial history before approving a loan. If a lender promises "guaranteed approval" with no credit check, it's a major red flag. Another warning sign is upfront fees. While reputable lenders may charge processing fees, they never demand payment before approval. Scammers often ask for the following:

Application fees
"Insurance" or "processing" fees
Payments via wire transfer, gift cards, or cryptocurrency

If a lender asks for money upfront, walk away. Legitimate lenders deduct fees from the loan after approval, never before. If you're being pressured to pay before securing the loan, it's likely a scam.

3. Look for Secure Communication and a Trustworthy Website

Scammers often create fake websites that mimic legitimate lenders, making it easy to fall for a fraudulent loan offer. Before submitting any information, take these steps to verify a lender's website and communication methods:

Check for a secure website – Ensure the website starts with https://, not just http://, and look for a padlock symbol in the browser bar. These indicate the site uses encryption to protect your data.
Verify the domain age – Scam websites are often newly created. You can check when a website was registered using whois.domaintools.com. A lender with a website only a few months old is a red flag.
Call the lender using a publicly listed number – Do not trust phone numbers provided in emails or messages. Instead, search for the lender's official website independently and use the contact number listed there to confirm their legitimacy.

4. Read the Loan Terms Carefully and Avoid High-Pressure Tactics

Scammers often use confusing language and fine print to trick borrowers into accepting unfair terms. Before signing anything, watch out for:

Extremely high interest rates disguised with misleading wording
Hidden fees that significantly increase the total cost of the loan
Debt traps that make it nearly impossible to repay the loan in full

Always read the entire loan agreement, even the fine print. If the terms seem vague or difficult to understand, consult a financial expert before committing. Legitimate lenders allow time for you to review the loan and make an informed decision. Scammers, however, use urgency as a pressure tactic. If a lender insists that "This offer is only available today" or "You must pay immediately to secure your loan," it's a strong sign of fraud.

5. Check for Signs of Phishing and Identity Theft

Some scam lenders are not just after your money—they want your personal and financial information to commit fraud. Be cautious if a lender:

Asks for too much personal data upfront, such as full banking details or Social Security numbers, before approval
Sends poorly written emails with typos, strange formatting, or urgent language, pushing you to act fast
Calls unexpectedly and pressures you to apply, especially if you never reached out to them first

Even if a lender appears legitimate, they may still be engaging in unfair or deceptive practices. Before applying, run a quick search using the lender's name along with keywords like "scam" or "complaints" to see if other business owners have reported issues.

If you spot any of these red flags, it's best to stay away. Protecting your personal and financial data is just as important as securing your business funds.

Protect your Small Business

Loan scams are just one of the many online threats targeting small businesses today. Protecting your data, accounts, reputation, and finances is essential to keeping your business secure.

Bitdefender Ultimate Small Business Security provides comprehensive protection against cyber threats, helping you stay ahead of scammers. With real-time phishing and scam detection, advanced identity protection, and AI-powered Scam Copilot, it identifies fake loan offers, phishing emails, and suspicious transactions before they can put your business at risk.

Its multi-layered security safeguards your devices, accounts, and sensitive data, allowing you to focus on running and growing your business with confidence.

Explore our small business security plans.