Grants provide funds to individuals and small businesses. The greatest feature regarding a grant would be that the finances are free; you would not have to repay the entity or establishment that provided the funds. Grants deliver cash that can assist entrepreneurs to maintain their competitive advantage in the short to medium term.
Grants, particularly at the federal and state level, necessitate a lengthy process that includes required documents, financial supporting documents, as well as a finished grant recommendation.
You won’t get an email providing you with government cash except if you’ve discovered a grant bid, gathered all the information necessary, documented a proposed bill, and submitted your application. Despite this, federal grant scams mislead large numbers of entrepreneurs every year.
Such scams attempt to obtain your tax documents, such as your Social Security number or Employer Identification Number (EIN), as well as details about your bank account.
Whatever private details they obtain from you allow them to operate credit cards, obtain loans, or move money to new checking accounts. According to reports, roughly 6% of entrepreneurs eventually succumb to scams every year, resulting in $7 billion in aggregate losses.
Most Common SBA Grant Fraud
Despite the numerous grant scams in the United States, below is the most widely known SBA grant fraud.
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1. EIDL Fraud
Whenever a borrower lies concerning his or her earnings or intentionally delivers falsified paperwork to acquire an EIDL loan, this is referred to as EIDL fraud. The SBA is projected to have overpaid $4.5 billion in deceitful EIDL claims solely via grants.
EIDL fraud investigations frequently involve entrepreneurs lying regarding their firm’s overall income or the number of staff they have. There have also been blatant deception regarding the establishment of the small company. Although SBA no longer administers grants, EIDL advance fraud continues to remain among the most exploited features of the program.
Cases of Notable EIDL Fraud
The specifics of EIDL loan fraudulent activity are eye-opening. Here are a couple of examples.
1. Getting Loans Through Coordination
In Pennsylvania, a Florida tax preparer was charged with conspiracy to gain over $7 million in EIDL loans, SBA loans, as well as Paycheck Protection Program (PPP) loans. Working with eight other people, he would have them create the required documentation to make it appear as if they had operating businesses with staff members.
He even went so far as to create “forgiveness plans” to create the impression that almost all of the funds will be used for personnel costs, meeting the SBA’s criteria for PPP forgiveness.
2. Information Forgery
In Monroe County, Pennsylvania, a defendant was charged with $450,000 in a COVID-relief scam. The accused received two EIDL loans amounting to $300,000 and attempted to procure a third loan amounting to $150,000. He is arrested on charges of faking financial data for two smaller companies and faces the following charges:
There are five counts of wire fraud.
Three counts of unauthorized financial transactions
3. Financing Extravagances
A Long Island doctor admitted guilt to fraudulently possessing EIDL and PPP funds and utilizing them to purchase a yacht and other expensive things. He faced a substantial seizure of assets, a $250,000 fine, as well as up to 30 years in prison.
He alleged to have utilized most of the money he managed to steal for payroll uses, including the $1.75 million yacht he purchased by trying to make the check amount due to a close relative.
4. Making Use of Identity Theft
Seven individuals have been detained in Los Angeles as part of a multi-million dollar PPP as well as EIDL loan fraudulent activity.
The ring’s leader was condemned to 17 years behind bars. The leader of the group as well as his inner circle were accused of obtaining over $20 million in EIDL and PPP funds through a combined effect of identity fraud and document misreporting.
How to Safeguard Yourself
The Inspector General has issued guidelines for identifying criminals at work:
1. Examine Emails
The SBA only interacts via email accounts that end in @sba.gov. You ought to be suspicious if you are notified by anyone trying to claim to be from SBA but are not utilizing a formal SBA email address.
2. Refuse to Make an Upfront Payment
Presume scam if you are notified by an individual who promises to obtain an SBA credit facility but necessitates any initial payment or proposes a high-interest credit facility in the interim.
3. Check the numbers and logos again
If you are refunding your SBA line of credit and begin receiving email conversations requesting identification figures, make sure the cited application number matches the exact application number. Keep an eye out for phishing/scams that use the SBA logo.
They are only trying to procure your personal identifying information, private banking access, or the installation of ransomware/malware on your desktop.
Please ignore them if you receive messages, email messages, or even other correspondence purporting to come from the Department Of the treasury and offering COVID-19-related grant funding or stimulus payouts in return for private banking data, an advance fee, or any additional pay, such as the acquisition of gift cards.
Feel free to notify the FBI at www.ic3.gov to help track down and stop the fraudsters. Staying alert is an effective way to defend your small company from grant scams! Be aware that there are fraudsters around nowadays, and be cautious of everything that appears dubious.