Protecting Your Business From COVID Scams

To protect your business from COVID-era scams, treat any unsolicited offer of "guaranteed" pandemic grants, loan forgiveness, tax credits, or fast money as suspect until you independently verify it — legitimate government programs never cold-call, never demand an up-front fee to release funds, and never guarantee approval before reviewing your business. The scams that spiked during the pandemic have not disappeared; they have rebranded. In 2026 the biggest threats to US small businesses are Employee Retention Credit (ERC) mills promising oversized refunds, fake SBA and PPP "forgiveness" agents harvesting your EIN and bank logins, phony grant portals, and advance-fee loan schemes that collect a "processing" or "insurance" payment and vanish. The defense is boring but effective: verify the source through official channels, refuse to pay to receive money, and when you genuinely need capital, work with transparent, revenue-based funding where approval is grounded in your bank deposits — not in a promise that sounds too good to be true.

The COVID scam playbook that still targets small businesses

Pandemic relief created three things fraudsters love: large sums of government money, urgency, and confused business owners who did not fully understand the rules. Those conditions outlived the programs. The specific pitches evolve, but the underlying playbook is consistent.

• ERC / tax-credit mills. Aggressive firms cold-call or email claiming you qualify for a huge Employee Retention Credit refund, take a large contingency fee, and file inflated or ineligible claims — leaving you exposed to IRS clawbacks, penalties, and interest years later.
• Fake SBA, PPP, and EIDL 'forgiveness' agents. Callers or spoofed emails impersonate the SBA or your lender, offering to 'complete your forgiveness' or 'release remaining funds' in exchange for your EIN, bank credentials, or a fee.
• Grant scams. Bogus federal, state, or foundation 'small-business grant' portals — often promoted through social media DMs or hacked accounts — collect an application or 'release' fee for money that does not exist.
• Advance-fee loan fraud. A 'lender' approves you instantly, then requires an up-front payment for insurance, taxes, or first-month interest before disbursing. Once you pay, the loan never funds.
• Phishing and account takeover. Emails and texts referencing COVID relief drive you to a login page that captures your banking or payroll credentials.

Every one of these leans on the same emotional levers: fear of missing free money, pressure to act now, and the authority of a government logo. Recognizing the pattern matters more than memorizing each variation.

Red flags: how to spot a scam in under a minute

You rarely need to be a fraud expert. A handful of red flags catch the overwhelming majority of pandemic-related scams. If an offer trips even one of these, stop and verify before you share anything or send a dollar.

• You have to pay to get paid. No legitimate grant, tax credit, or loan requires an up-front 'release,' 'insurance,' 'processing,' or 'tax' fee before funds are disbursed. This is the single most reliable tell.
• 'Guaranteed' approval or a 'guaranteed' refund. Real underwriting reviews your business. Anyone guaranteeing an outcome before looking at your bank statements or filings is selling a fantasy.
• Unsolicited contact claiming to be the government. The SBA and IRS do not cold-call, text, or DM you to hand out money or ask for banking logins.
• Urgency and secrecy. 'The program closes today,' 'don't tell your accountant,' 'wire it now.' Pressure is a manipulation tactic, not a business term.
• Requests for credentials or remote access. A real funder needs read-only bank data or statements — never your online-banking password, MFA codes, or screen-share control.
• Payment by wire, gift card, crypto, or a personal account. Untraceable payment rails are a hallmark of fraud.
• Mismatched contact details. Free email domains, phone numbers that don't match the company, or a portal URL that is slightly misspelled.

ERC mills and forgiveness fraud: the slow-burn traps

Not every COVID scam empties your account today. Some plant a liability that detonates later, and ERC mills are the clearest example. A firm files an aggressive Employee Retention Credit claim, pockets a percentage of the refund, and disappears — but the IRS holds you, the business owner, responsible for repaying improper credits plus penalties and interest. The refund felt like free cash flow; the clawback arrives when you can least afford it.

Forgiveness fraud works similarly. A caller offers to 'finalize' PPP or EIDL forgiveness and either charges a fee for a free process or uses the conversation to steal identifying data that later enables account takeover or synthetic-identity loans in your business's name.

Protect yourself by treating tax and relief decisions as underwriting-grade decisions: work only with a credentialed CPA or enrolled agent you selected (not one that found you), keep every filing and calculation on record, and never let a third party file in your name without seeing exactly what was submitted. If a refund or forgiveness amount seems dramatically larger than your payroll and revenue would support, that gap is the warning, not the reward.

How to verify a legitimate funder before you share anything

Legitimate revenue-based funders and marketplaces are easy to verify because they behave transparently. Before you upload a bank statement or sign anything, run this checklist.

• Confirm the company independently. Search the business name plus 'complaints' and 'reviews,' check that the website, phone, and email all match, and look for a real US business address — not just a form.
• Read the offer in writing. A real funder puts the funding amount, the factor or cost, the payment structure, and the term in a written agreement. If you cannot get terms in writing before committing, walk away.
• Watch what data they ask for. Bank statements or secure read-only bank connections are normal. Your online-banking password, MFA codes, or a fee are not.
• Verify the payment direction. In legitimate funding, money flows to you at closing. You never wire money to a lender to unlock a loan.
• Check for licensing and disclosures. Reputable providers disclose who they are, whether they are a direct funder or a marketplace/broker, and how they are paid.

For a deeper walkthrough of legitimate options and terms, see our pillar guides on revenue-based financing and business funding basics.

Example: scam offer vs. a legitimate revenue-based offer

The contrast is usually stark once you lay it side by side. The figures below are illustrative, for example only, to show the shape of each offer — not a quote.

If a real need for working capital is what led you toward a shady offer in the first place, that need is legitimate — the solution is to route it to a transparent funder, not to pay a fee to a stranger.

Decision framework: when revenue-based funding is the right safe alternative

Owners often fall for scams because they have a genuine cash-flow gap and are shopping under pressure. Revenue-based funding through a reputable marketplace can fill that gap safely — but it is not right for every situation. Use this framework.

It works best when:

• You have consistent bank deposits and steady revenue, even if your credit is thin or your FICO is in the 500s.
• The need is time-sensitive working capital — payroll, inventory, a bridge to a receivable, or covering a seasonal dip — and you can service payments from ongoing sales.
• You want a fast, transparent decision (often 24–48 hours) grounded in deposits rather than a long bank underwriting cycle.
• The use of funds produces or protects revenue you can reasonably project from your own numbers.

Avoid it (or slow down) when:

• Revenue is erratic or declining and new payments would strain already-tight cash flow.
• You are borrowing to chase a 'guaranteed' grant, credit, or opportunity that itself shows scam red flags.
• A cheaper, appropriate option fits your timeline — for example, a bank line of credit or SBA loan you have time to pursue.
• Anyone pressures you to sign the same day without written terms. No one should ever guarantee approval, and reputable funders never do.

What to do if you have already been targeted or scammed

Speed limits the damage. If you shared credentials, sent a fee, or signed something under pressure, act on the same day.

• Contact your bank immediately. Report the transaction, request a recall or dispute, and ask them to lock or reissue affected accounts and cards.
• Rotate every exposed credential. Change online-banking, payroll, and email passwords, and turn on multi-factor authentication everywhere.
• Report it. File with the FTC at ReportFraud.ftc.gov, report SBA-related fraud to the SBA Office of Inspector General, and file with the FBI's IC3 for wire and online fraud. Reporting helps you and creates a paper trail.
• Loop in your CPA or enrolled agent if the scam touched tax filings, ERC, or forgiveness, so any bad filing can be corrected before it compounds.
• Watch for follow-on scams. Victims are frequently re-targeted by 'recovery' services that charge a fee to get your money back — the same trick, twice.

Then protect your ongoing cash flow through legitimate channels. A transparent, revenue-based funder can help you recover working capital without handing another stranger your bank logins or a fee.