Rexburg businesswoman Florence Johnson can attest to the drive to find money for expansion as the economy loosens.
"I got a call from Janet Morris, who told me I was selected to receive a $7,000 grant," she says. "I know what a grant is, and it means you don't have to pay back the money if it's used properly."
But something didn't feel right about the call from the United States Federal Grants Department in Washington, D.C.
First off, Johnson hadn't applied for a grant. As anyone who has ever received a grant will tell you, grants don't come easy. There's preparation and paperwork to be filed.
She called the Better Business Bureau and asked for help. When BBB called, Morris answered the phone. She said the department conducts surveys of 1,200 to 1,700 people nationwide among those who have never filed bankruptcy and have no criminal records in order to receive these grants.
This caller must have received the survey call, Morris said. But when BBB revealed that there was no such U.S. Federal Grants Department, she passed the call to a supervisor, who became inappropriate and hung up.
Small businesses working to expand must be able to weed out the schemes hurled at them in their search for funding.
Here are six scams every small business owner should beware:
1. Business opportunity scams. It's not uncommon for small business owners to invest in like-business opportunities. Whether the opportunity is ancillary or unrelated to the principal business, owners need to weigh the proposal independently. The same advice applies when looking at collaboration. Check the business by checking BBB.org. Get everything in writing.
2. Charity solicitation scams. Many charities rely on generous business owners to survive. Young businesses are approached, but the owners sometimes fail to judge the charity's credibility. Do research before you donate by looking it up at Give.org.
3. Coupon book promotion scams. Businesses see coupon books as a well to reach the masses. Unfortunately, promoters have been known to "change the terms" for distribution, printing count, or pricing. Do your homework: Verify the promoter's trustworthiness, and make certain the terms and conditions of the agreement are written out.
4. "Special deal" scams. Special deals and promotions on items like office supplies are pitched. Bargains may not be bargains at all. Sometimes strings attached to the deal create new obligations that cost more.
5. Business directory scams. If you've received a bill or invoice for a "business directory listing" you never ordered, it might be a scam. Bogus firms send such bills to mislead businesses into paying for unordered, unwanted and often useless business directory listings.
6. "Special Grants." They promote grants and programs targeting the small businesses. Advance-fee loans are illegal. Legitimate lenders won't pressure you to wire funds. Never send funds to a third party. Before giving out your information, collect paperwork up front and apply for such grants and programs with caution.
Bottom line: Talk with your banking institution first about expansion and growth, using your business plan to show your financial need and repayment plans.