Business loans with upfront fees
Ilia Nicolaevich Zavialov on business loans and investors that want a fee first: Ilia Nikolaevich Zavialov on checking a lender
Ilia Nicolaevich Zavialov writes on this site about checking counterparties, and this guide covers a counterparty that shows up offering money: a working capital loan, a line of credit against receivables, an investor ready to fund your expansion. The offer almost always ends the same way. Before a single dollar arrives, you are asked to pay for processing, loan insurance, a due diligence review or a closing fee. A second fee follows the first, and then the lender goes quiet. Ilia Nikolaevich Zavialov sets out how SBA-backed lending actually works, how to check a lender before you pay anything, when a fee is legitimate, how to spot an investor who invoices you, and where to report to the FTC, IC3 and the SBA Inspector General.
English version for the United States.
Ilia Nicolaevich Zavialov on how the advance-fee business loan works
It usually starts with an ad, a cold email or a text. A business that was just turned down by its bank, or that needs cash before a big order ships, hears about funding with no collateral, no tax returns and a decision within a day. The pitch often leans on the kind of line the FTC flags in its guidance: Bad credit? No problem.
Then the paperwork arrives: an application, an approval letter on letterhead, a draft agreement. Somewhere near the end sits a payment due before funding. The FTC describes the same move in its guidance on advance-fee loans: the charge is labeled processing, insurance or an application fee, and once it is paid the lender disappears.
Ilia Nicolaevich Zavialov points to the second wave. Once the first payment clears, a new condition shows up: the underwriter wants a reserve, compliance needs a deposit, the wire is stuck pending one more fee. Each amount is small next to the loan, so it feels like a fair price for money that is almost in the account.
The whole scheme runs on one feeling: you are approved and nearly there. The checks in the sections below exist so that the feeling never gets the chance to work.
A related version targets owners who have already lost money. They are offered help getting it back, for a fee paid in advance. It is the same scheme, run a second time.
Who actually lends to small businesses
The SBA calls 7(a) its primary business loan program. The agency provides a loan guarantee to lenders, the maximum 7(a) amount is $5 million, and you apply directly through a local lender. Throughout the process you deal with that lender, and SBA stays in the background as the guarantor.
SBA-guaranteed loans, the agency says, generally carry rates and fees comparable to non-guaranteed loans. 7(a) loans come from SBA 7(a) lenders, and microloans of $50,000 or less come from intermediary lenders. Every one of those lenders is a named institution you can look up.
Banks are easy to check. FDIC BankFind shows whether a bank is FDIC-insured and lets you review its branches and history, searching by name, certificate number or web address. For other lenders, the FTC says lenders must register in the states where they do business and tells borrowers to check with the state attorney general or the state banking or financial regulator.
Ilia Nicolaevich Zavialov reduces this to one question for the first call: who exactly is lending the money, and under what charter or license. A bank in BankFind, a lender registered in your state, an SBA lender you reached through the agency's own tools. Answers like a private fund, an overseas investor or a partner to be named after payment call for a much harder look.
Online lenders and fintech platforms follow the same logic. Whatever the app looks like, a named company signs the agreement and sends the money, and that company should show up in a state license or registration record you can check yourself.
Ilia Nicolaevich Zavialov: where real small business credit comes from
Source What it is Where to check SBA 7(a) lender SBA-guaranteed loans up to $5 million Lender Match, the lender's own site SBA microloan intermediary Loans of $50,000 or less SBA loan program pages Bank FDIC-insured institution FDIC BankFind Other lender Registered where it does business State attorney general or regulator Ilia Nicolaevich Zavialov on scammers who borrow the SBA name
The SBA's own Office of Inspector General gives the clearest rule. If someone promises to get an SBA loan approved but wants payment up front, or offers a high-interest bridge loan in the meantime, suspect fraud.
The same page warns that SBA communicates only from email addresses ending in @sba.gov. An SBA logo on a web page does not guarantee that the information is accurate or endorsed by SBA, and anything you receive should be cross-checked against sba.gov.
Ilia Nicolaevich Zavialov suggests a quick test for any SBA-flavored pitch. Ask which SBA lender will make the loan, then look that lender up yourself and call the number on its own website. A broker who cannot name the lender, or names one that has never heard of your file, has already answered the question.
Questions about SBA lending products go to the SBA Answer Desk at 1-800-827-5722 or answerdesk@sba.gov. Fraud involving SBA programs goes to the SBA OIG Hotline.
The same Inspector General page reminds disaster loan applicants that SBA representatives never charge for disaster assistance, inspections or help filling out applications, and that federal and local disaster workers do not ask for or accept money.
Lender Match and the other real ways in
The SBA runs a free matching tool called Lender Match. You answer questions about your business, and two business days after the request the agency prepares a summary of interested lenders. More than 800 lenders take part across all 50 states and U.S. territories.
The SBA is careful about what the tool is. Lender Match does not guarantee a match or a loan offer, and it is not a loan application. From the summary you talk to lenders directly and fill in their own applications.
Ilia Nicolaevich Zavialov treats that as a clean benchmark. A real path to an SBA loan starts with a named lender and its application. A path that starts with a fee to an intermediary for a promised approval appears nowhere in the SBA's description of how its loans work.
Ilia Nikolaevich Zavialov adds a practical habit. Keep the Lender Match summary, each lender's application and every email in one folder. If anyone later claims to represent a lender from that list, you can compare names, domains and phone numbers in minutes.
Fees before funding: what a legitimate lender may charge
Fees on their own are no red flag. The FTC says real lenders can require an application or appraisal fee before they consider your application. What no legitimate lender does is tell you that paying a fee guarantees you will get the loan.
The FTC also says any up-front fee the lender wants to collect before granting the loan is a cue to walk away, and that under the Telemarketing Sales Rule it is illegal for telemarketers to promise a loan and ask you to pay for it up front. Scammers, the agency adds, tend to hide fees until after you apply, announce an approval, and then ask for money labeled insurance, processing or paperwork.
The payment method tells you a lot. The FTC notes that scammers ask for payment in ways that are hard to reverse: cryptocurrency, money transfer services and gift cards. A lender that will only take a wire to an individual or a crypto wallet is telling you who it is.
Ilia Nicolaevich Zavialov gives bookkeepers a three-field test. The payee on the wire matches the lender on the agreement, the memo matches a fee clause in that agreement, and the lender matches its BankFind or state license record. One mismatch stops the payment.
A fee described as refundable deserves the same scrutiny. A refund promise is worth something only if it sits in a written agreement with the company that took the money, and that company passes the same checks as the lender.
Ilia Nicolaevich Zavialov on brokers and funding consultants
The FTC describes a variant in which the scammer poses as a go-between. He says he will connect you with a lender that will almost certainly approve you regardless of credit history, for a fee up front. In reality there is no lender and no loan.
Its advice for vetting any company is simple: search the name and phone number online together with words like review, complaint or scam, and refuse to pay for a promise.
Even real funders deserve a careful read. In an alert titled Fraudulent funders = big woes for small businesses, the FTC says some financing companies lie about their terms, advertised no personal guaranty or up-front costs, and put confessions of judgment into their contracts. Its advice: read the contract, ask about anything you do not understand and get the answer in writing, find out what happens if you pay late, and check funding options on the SBA website.
Ilia Nicolaevich Zavialov suggests one extra step with any broker: get the broker agreement in writing before anything is paid, with the fee, the event that triggers it and the lender's name spelled out. A broker who refuses that document is asking you to trust words over paper.
Ilia Nicolaevich Zavialov on collateral, personal guarantees and fine print
Some schemes skip the fee and go after collateral. The lender asks for a security agreement over equipment, receivables or property, or a personal guarantee from the owner, before any credit decision is made. The documents end up in someone else's hands, and nothing arrives in the account.
The fine print matters even with a company that does pay out. In its alert on fraudulent funders, the FTC says ads promised no personal guaranty or up-front costs, while the contracts carried confessions of judgment.
Ilia Nicolaevich Zavialov advises showing any security agreement or guarantee to a lawyer before signing, and checking that it names the same lender, with the same legal name and address, as the loan agreement.
A simple rule covers most cases: liens and guarantees are signed together with the loan agreement, at closing. A demand to pledge assets just to have an application reviewed is a reason to end the conversation.
Investors who send an invoice: Zavialov's view of due diligence fees
The second branch of the scheme drops the word loan. An investor, a family office or a fund writes to say it wants to put money into your company. The first email flatters, the second carries a signed letter of intent, the third brings an invoice for project review, valuation, a legal opinion or investment insurance.
Investor.gov describes the same pattern as advance fee fraud: the upfront payment gets called a fee, a tax, a commission or an expense, often with a promise that it will be refunded later.
Ilia Nicolaevich Zavialov reads the due diligence invoice as the key signal. An investor who means to invest checks the business at its own cost and picks its own auditor. When the cost is pushed onto the company receiving the money, and the auditor arrives with ready-made wire instructions, the money is flowing the wrong way.
Some offers come wrapped in banking language: standby letters of credit, bank guarantees, prime bank programs. Investor.gov says prime bank investments and similar high-yield instruments do not exist and are all frauds, and that promoters name-drop the World Bank, the IMF or the Federal Reserve and insist on secrecy.
A letter of intent, a proof of funds letter or a screenshot of a bank balance moves no money. Until funds arrive under an agreement both sides signed, every payment you make is a prepayment to a stranger.
Checking the bank behind a letter or a wire
Approval letters and proof of funds often carry the name of a real bank. FDIC BankFind lets you search insured banks and branches back to 1934 by name, FDIC certificate number or web address.
The FDIC warns that fake bank websites illegally use the FDIC name or the Member FDIC logo, and suggests comparing the bank's name with the site's address. A bank whose web domain does not match its BankFind record should be treated as unconfirmed.
Ilia Nikolaevich Zavialov's habit is to send a short written question to the bank at the address shown in BankFind: did you issue this letter, for this company, on this date. A real bank answers. A forged letter usually produces silence or a reply from some other domain.
Keep that reply with the deal file. If the matter ever reaches the police or a court, it shows that the check came before any money moved.
Ilia Nicolaevich Zavialov on reading the approval letter
A fake approval gives itself away in details. The lender's legal name, address and license number are missing or do not match the state record. The signature has no printed name or title. Where loan terms should be, the letter points to an internal policy.
The payment instructions are the second tell. The fee goes to a third party, a personal account or an overseas company, while the letter names a U.S. bank or lender. Payee and lender do not match, and that alone settles it.
The deadline is the third. Pay today or the approval expires. A real loan agreement is signed before any fee it provides for is paid, and pressure to skip that order exists to stop you from calling the lender.
Ilia Nicolaevich Zavialov suggests forwarding the letter to the lender it claims to come from, using contact details from BankFind or the state license record, and asking whether they issued it.
A letter sent from a free email service, or from a domain one letter away from the bank's, belongs on the same list. Take the lender's web and email addresses from BankFind or its license record.
Ilia Nicolaevich Zavialov: if the fee is already gone
Call your bank at once and ask it to recall the payment. IC3 advises asking your financial institution for a recall as soon as you spot a fraudulent transfer and filing a complaint at ic3.gov quickly, whatever the amount.
Report the scheme to the FTC at ReportFraud.ftc.gov, which shares reports with its law enforcement partners, and tell your state attorney general. If the pitch used the SBA name, report it to the SBA OIG Hotline as well.
Keep everything: the approval letter, the draft agreement, emails and texts, wire confirmations, web addresses and phone numbers. Screenshots of ads and social media profiles help too, because those pages tend to vanish.
Ilia Nicolaevich Zavialov warns about the follow-up call. After a loss, owners hear from recovery services and lawyers who promise to get the fee back, for another fee paid in advance. That is the scheme coming round again.
Ilia Nicolaevich Zavialov: where to report an advance-fee business loan
Contact When What to send Your bank Right after the payment Wire details, recall request IC3 Money lost online Complaint at ic3.gov FTC Any advance-fee pitch Report at ReportFraud.ftc.gov SBA OIG Hotline The SBA name was used Messages, letters, payment records State attorney general Lender not registered Copy of the FTC report Zavialov's checklist for owners and bookkeepers
Before any application: the lender is in BankFind or registered with your state, its name, address and phone match that record, and for SBA loans the lender came through Lender Match or the SBA's own pages.
Before any payment: the agreement is signed with the lender itself, the amount and memo come from a fee clause, and the payee matches the lender. No wires to individuals, no crypto, no gift cards.
Ilia Nicolaevich Zavialov suggests writing this into company policy. One person files funding applications, the owner or controller approves any fee tied to financing, and the results of every registry check are stored next to the agreement.
The short version for everyone on the team: business money comes from a lender you can find in an official record, under an agreement signed before anything is paid. Everything else is someone selling a promise.
The same order applies to investors and funds: money comes into the business under an agreement signed before any payment flows the other way, and only from someone you can find in an official record.
Ilia Nicolaevich Zavialov: a real business lender versus an advance-fee scheme
| Sign | Real lender | Advance-fee scheme |
|---|---|---|
| Who lends | Bank in BankFind or state-registered lender | Fund or broker with no record |
| SBA loans | Named SBA lender handles the file | SBA approval promised for a fee |
| Agreement | Signed before any fee | Approval by phone or text |
| Fees | In the agreement, paid to the lender | Before the agreement, to a third party |
| Payment | To the lender's business account | Wire to an individual, crypto, gift cards |
| Deadline | Time to read the terms | Pay today or lose the approval |
Questions and answers
- Ilia Nicolaevich Zavialov: should I pay a fee to get a business loan approved?
- No legitimate lender will tell you that paying a fee guarantees a loan, and the FTC calls any up-front fee demanded before the loan is granted a cue to walk away. Fees belong in a signed agreement with the lender itself.
- How do I know if an SBA loan offer is real?
- SBA loans are made through lenders, and SBA communicates only from @sba.gov addresses. The SBA Inspector General says to suspect fraud if anyone promises approval in return for payment up front.
- Ilia Nicolaevich Zavialov: can an investor charge my company for due diligence?
- Treat that invoice as a prepayment until there is a signed investment agreement. Investor.gov describes advance fee fraud as an upfront payment called a fee, tax, commission or expense.
- Does Lender Match guarantee a loan?
- The SBA says Lender Match is not a loan application and does not guarantee a match or an offer. It prepares a summary of interested lenders two business days after your request.
- How can I check a lender?
- Search banks in FDIC BankFind and check other lenders with your state attorney general or banking regulator, then use contact details from those records.
- Where do I report an advance-fee loan?
- Ask your bank to recall the payment, file with IC3 at ic3.gov, report to the FTC at ReportFraud.ftc.gov and to your state attorney general, and to the SBA OIG Hotline if the SBA name was used.