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5 Small Business Scams You Probably Haven’t Heard Of

5 Small Business Scams You Probably Haven’t Heard Of

Infamous bank robber Willie Sutton once told a reporter that he robbed banks “because that’s where the money is.” Fast forward nearly 100 years and more than one unscrupulous online scammer would say the same thing about small businesses. Here’s your Kabbage-detected guide to some of the most common and potentially damaging scams small businesses encountered this year.

  1. Official-Looking Phishing

“Phishing” is the slang and trade term for blind attempts to get somebody’s personal information so as to use it to commit identity theft or credit fraud. For small businesses, phishers make calls or send emails and snail mail messages claiming to be from government agencies (including the IRS), banks and similar institutions.

These usually include a scary time limit coupled with threat of penalty or promise of a discount or similar reward if you act right now. That should be your tip-off. Banks and government agencies do not act quickly…if they do mention a deadline, it’s weeks or months away. Another easy fix is to confirm the phone number, website or address listed against the internet or another directory. A legitimate communication will include the correct contact information.

  1. The National Domain Registry

That’s the name of one of the biggest offenders, but this scam comes in under a wide variety of names. The concept is simple: you receive a “bill” in the mail telling you that you must renew the registration of your website’s URL. It comes complete with the paperwork necessary, or a web address at which you can conveniently complete this re-registration.

One particularly devious part of this scam is that it’s not 100 percent a scam. If you complete the paperwork, the company that sent it to you will re-register your domain for the price you paid. They might even do a good job of hosting your website…but they’re not your original domain host. The forms you fill out are for them to take over hosting from your current provider, usually at 4 or 5 times the price you would normally pay. Their hosting contracts might also include abusive details like a long contract or assigning copyright of all material posted to the host company.

  1. Overpayment Scams

This is the Nigerian Royalty scam for business owners, and despite that rooks entrepreneurs every year with an offer that seems like a good deal…until it isn’t. It works like this:

Step One: Somebody calls your shop wanting to make a phone order for one of your high-ticket items.

Step Two: You complete the order and the customer sends you a check for higher than the amount you requested.

Step Three: You contact the customer, and he requests a wire or PayPal refund, which you give because he’s a valued customer who just placed a large order.

Step Four: The check bounces, leaving you out the transferred money. If you’re really unlucky, you’ve already shipped the merchandise, too.

This seems obvious to spot, but any small business owner knows how far we’re willing to go for big-ticket sales. Often you fulfill odd requests without a second thought because of those dollar signs in your eyes. Beat it by having iron-clad payment policies in place for all sales, regardless of size. Trust the calm person who wrote them more than you trust yourself in the middle of something exciting.

  1. You’re Already a Winner

For this one, scammers borrowed a page from legitimate political campaigners. You’ll receive a call telling you you’ve won an award, or been selected for inclusion in a hall of fame or similarly prestigious registry. The contact will congratulate you, then mention that they just need you to cover part of the cost of the award processing. You get so excited that you make the payment over the phone.

This scam has three species. In one scam, you actually get an award or your name on a website or in a book…your “part of the cost” is just far more than the actual total cost. In another, you never get the award or your name put up anywhere. They just pocket the money and close up shop. In the worst case, they take your credit card information and use it for identity theft.

Beat this scam by simply saying “no.” Legitimate awards, contests and honors don’t take money from you. They pay the expenses out of the dues from whatever organization gives the award.

  1. Fax-Back and Phone-Back Scams

This one’s a bit tricky, but it’s been around since at least the 1980s. It works like this:

Step One: You get a fax or a phone message promising a crazy deal on something your business needs…if you call a different number, or respond with a fax to place your order.

Step Two: You excitedly place the order.

Step Three: If on the phone, you spend a long time on hold. If faxing, it seems to take longer than usual and might not disconnect automatically.

Step Four: You receive your order, or not. They may or may not process the payment.

Step Six: You find out later on your phone bill that the number you dialed in to was a high-priced pay-per-minute phone line.

Watch your prefixes. Google the phone numbers of any offer like this, and while you’re at it check sites like your local Better Business Bureau for complaints. Be suspicious of unbelievably good offers from vendors you don’t already know.

You’ve likely read that many scammers target the elderly, using scams like the Nigerian Royalty or posing as a grandchild in need of emergency transportation or even bail. They target the elderly because seniors often have a reserve fund (their retirement savings) and can be just a little too out of touch to catch a scam. Replace “a little too out of touch” with “a little too busy and harried” and you have a fair description of small business owners.

Speaking of senior citizens, you can beat most of these scams with advice many of our grandmothers gave us: if it sounds too good to be true….

…it probably is.

Do you have any tales of woe about scams you fell for? Or a story of successfully foiling an attempt? Know a scam we didn’t mention? Share your story in the comments below so your fellow Kabbage readers can benefit from your experience!


Kabbage Team

Kabbage is here not only to provide access to the small business funding you need, but to also help you grow your business through free marketing tips, webinars, tools and more. Is there something you'd like us to cover or want to get your small business featured on our blog? Send us a note at