Over 60 percent of businesses report being the target of scammers, according to Better Business Bureau (BBB) polls. Nearly three-quarters of those who say they’ve been scammed report losses of $250,000 or more. Small businesses are often the preferred targets, with reports of some forms of fraud and scams skyrocketing by more than 70 percent since the pandemic, Experian reports. If you aren’t alert, you could be next.
From phishing to ransomware, fake invoice, and directory scams, we’ll walk you through the most common small business scams being seen today and what you can do about them.
Why Scams Targeting Small Businesses Are So Prevalent
Small business owners often think they are not worth a scammer’s time. However, your size is exactly what makes your business appealing. Smaller operations tend to move quickly, rely on trust, and run lean. These qualities make day-to-day operations efficient but also create openings for manipulation.
Small Businesses Often Have Limited IT Resources and Compliance Structures
Most small businesses lack the dedicated infrastructure and cybersecurity strategies that large enterprises rely on to detect and block threats. A single employee or vendor may handle everything from password management to system updates, which leaves gaps that criminals can exploit.
- Narrow Security Coverage: Cybersecurity budgets in small businesses are typically modest, often focused on immediate needs rather than layered protection or proactive monitoring.
- Delayed Maintenance: Routine updates and patch management may be postponed due to operational priorities, increasing the risk of exposure through known vulnerabilities.
- Unstructured Employee Training: Without consistent training programs, staff members can miss subtle indicators of phishing, social engineering, or malware attempts.
Small Businesses Are More Likely to Have Gaps in Financial Oversight or Vendor Controls
Fraudsters also take advantage of limited financial oversight. In many small businesses, processes are built on trust and efficiency rather than formal controls. That makes it easier for fraudulent activity to blend in with legitimate operations.
- Overlapping Financial Duties: When the same person approves, pays, and reconciles transactions, there is less opportunity for internal checks that could flag suspicious activity.
- Limited Vendor Verification: Scammers frequently impersonate real suppliers or create near-duplicate invoices that appear authentic, redirecting payments to fraudulent accounts.
- Irregular Reconciliation: When reconciliations are delayed or incomplete, errors and fraudulent transactions can remain undetected for extended periods.
Common Tactics Scammers Use and Red Flags to Watch For
Addressing the issues above can go a long way to protecting your business. However, scammers often focus on the human side of business, meaning they rely on emotion and trust to bypass logic and established procedures. Recognizing their tactics is one of the most effective ways to protect your business before a scam takes hold.
Using Your Trust Against You
Trust is the cornerstone of small business success. You rely on it to build customer relationships, delegate responsibilities, and maintain supplier partnerships. Scammers exploit that trust.
Their goal is not always to outsmart your technology; it is to outsmart your instincts. They may sound professional, reference details that seem credible, or pose as people you already know. The moment you assume authenticity, they gain leverage.
- False Familiarity: Fraudsters often gather public details about your company and use them to sound knowledgeable or appear connected.
- Authority Impersonation: Some pretend to represent regulators, banks, or company executives to pressure quick action.
- Selective Truths: Many scams include accurate but incomplete information that makes the entire story sound believable.
Creating a Sense of Urgency, Fear, or Intimidation
Scammers know that when you feel anxious, you act faster and verify less. They create urgency to trigger instinct rather than reason. That psychological pressure is one of the most reliable financial scam red flags you can spot.
- Time Pressure: Fraudsters claim an account will be frozen, a shipment delayed, or a license revoked unless you act immediately.
- Emotional Manipulation: Some play on fear, embarrassment, or authority to make you feel cornered.
- Artificial Deadlines: Requests that arrive late in the day or just before a weekend are designed to push quick action without review.
Asking You to Pay in Specific Ways
Payment method requests reveal more about a scam than most people realize. Legitimate businesses rarely demand unconventional payment types. When someone insists on a specific form of payment that limits your ability to recover funds, it should trigger immediate concern.
- Gift Cards: Scammers often ask for gift card payments because they can be redeemed quickly and are nearly impossible to trace.
- Cryptocurrency or Bitcoin: Once transferred, these payments are irreversible. No credible vendor or agency will require cryptocurrency as the sole payment option.
- Wire Transfers to New Accounts: Sudden changes to payment instructions, especially involving overseas accounts, warrant verification with your financial institution or vendor contact.
4 Most Common Types of Small Business Scams and How to Prevent Them
Now that we’ve covered what makes your small business vulnerable to a scam and why scammers may target you, let’s take a deeper look at some of the most common scams happening today and how you can prevent them.
1. Cyber and Email Scams
Technology has created new opportunities for small businesses and for scammers. Digital communication, online payments, and remote work make it easier than ever for criminals to reach your business without setting foot inside it.
AI-driven scams are on the rise and are expected to result in $40 billion in losses within the next two years, according to Experian. That growth is being fueled by increasingly realistic fake messages, cloned voices, and AI-generated documents that mimic legitimate correspondence. The result is that even cautious business owners can be caught off guard.
Examples of Cyber and Email Scams
Cyber and email scams come in many forms, but most share one goal: gaining access to your systems or convincing you to send money or sensitive data.
- Phishing Emails: Scammers send messages that look official, often from banks, vendors, or government agencies, to trick recipients into clicking malicious links or sharing passwords. These phishing scams for small companies are among the most common because they rely on volume and speed rather than complexity.
- Business Email Compromise (BEC): Fraudsters impersonate executives or vendors to authorize fake payments or redirect legitimate ones. Messages often mimic tone, signatures, and formatting perfectly.
- Ransomware Attacks: Malicious software locks your systems or data until a ransom is paid. Many attacks start through a single unsuspecting click in an email.
- Malicious Attachments and Links: Attachments that appear to be invoices, resumes, or shipping details can install malware designed to steal credentials or monitor activity.
Warning Signs of Cyber and Email Scams
Scammers work hard to make their messages convincing, but a few details almost always reveal them.
- Unusual Sender Details: A legitimate email may appear to come from a known contact, but small spelling variations or domain substitutions often indicate fraud.
- Unexpected Requests: Sudden payment authorizations, password changes, or requests for sensitive data should always be verified directly.
- Suspicious Links or Attachments: Even one careless click can open the door to an attack. Hover over links to see the real destination before engaging.
- Poor Grammar or Formatting: Automated tools have made scams cleaner, but subtle language errors or odd phrasing still appear in many attempts.
How to Prevent Cyber and Email Scams
Cybersecurity does not need to be complex, but it does need to be consistent.
- Implement Strong Authentication: Use multi-factor authentication for all systems and logins to make stolen passwords less useful.
- Standardize Payment and Communication Protocols: Establish written procedures for authorizing payments and vendor changes. This creates a framework for effective business email compromise prevention.
- Keep Systems Updated: Regular software and security updates close known vulnerabilities that attackers depend on.
- Provide Employee Scam Training: Teach employees how to recognize suspicious links, attachments, and requests, and make reporting potential scams easy.
- Back Up Data Regularly: Secure, offline backups protect your business from ransomware and data loss, allowing faster recovery if an attack occurs.
- Invest in Cybersecurity Insurance: Although cybersecurity insurance won’t prevent an incident, it can help your business recover faster and ensure you don’t take a financial loss as a result.
2. Invoice and Payment Scams
Each year, 65 percent of businesses report being victims of attempted or actual payment fraud, according to The Association for Financial Professionals (AFP). Nearly half of those who are victimized are unsuccessful in recouping any stolen funds.
Scammers exploit the fact that invoices and payments move quickly and often involve multiple people or systems. A single fake bill or altered payment detail can redirect thousands of dollars before anyone realizes what happened.
Examples of Invoice and Payment Scams
These schemes target routine processes and relationships that most businesses rarely question.
- Fake Invoices: Scammers send invoices that look identical to legitimate vendor bills, sometimes for small amounts that go unnoticed. Payments are routed to fraudulent accounts.
- Overpayment and Refund Scams: A scammer issues a payment for more than the invoiced amount and requests a refund for the difference. The original payment later bounces, leaving your business at a loss.
- Check Fraud: Criminals intercept legitimate checks or create counterfeit versions using your business details, draining funds before the fraud is detected.
- Invoice Redirection: Fraudsters pose as vendors and request that future payments be sent to a new bank account. Once the change is made, legitimate payments go straight to the scammer.
- Office Supply Scams: Scammers send unordered supplies or invoices for products that were never purchased, assuming busy offices will process payment without question. These schemes typically use generic packing slips or vague company names. Ensuring that all purchases require a formal order or approval process helps prevent this type of fraud from slipping through.
Warning Signs of Invoice and Payment Scams
Invoice and payment scams can be subtle, but a few patterns almost always stand out once you know what to look for.
- Unexpected or Duplicate Invoices: Invoices that arrive outside regular billing cycles or duplicate previous charges deserve verification.
- Changes to Payment Instructions: Requests to update account details or payment methods should always be confirmed through a known contact before processing.
- Unfamiliar Vendors or Contacts: Scammers often mimic legitimate companies with slight variations in names, addresses, or email domains.
- Unusual Urgency: When a message pressures you to approve payment immediately, it is often an attempt to bypass normal review procedures.
How to Prevent Invoice and Payment Scams
Payment and invoice fraud protection relies on clear processes and consistent verification. A few basic habits can protect your business from costly fraud.
- Establish Verification Protocols: Require confirmation through an independent channel whenever payment details or vendor information change.
- Segregate Financial Duties: Divide responsibilities for creating, approving, and reconciling payments to ensure multiple people review each transaction.
- Audit Vendor Lists Regularly: Remove outdated or duplicate entries that could be exploited to submit fraudulent invoices.
- Train Staff on Financial Scam Red Flags: Teach employees to spot inconsistencies in amounts, payment methods, and sender details before approving transactions.
- Use Secure Payment Systems: Choose systems with built-in authentication and monitoring features that detect anomalies and reduce exposure to fraud.
3. Impersonation-Based Scams
Impersonation scams remain among the most convincing and damaging forms of fraud facing small businesses. These schemes work because they rely on authority, familiarity, or fear; three emotions that can override logic and procedure in an instant. The goal is to make you trust the source long enough to act before verifying.
Examples of Impersonation-Based Scams
Scammers often pretend to be people or organizations you would never question. Once they gain your trust, they pressure you to share sensitive information or send money.
- Tech Support Scams: A caller or pop-up claims your computer or business system has a serious issue and offers immediate help. The “technician” then requests remote access or payment to resolve a problem that never existed.
- Impersonation Scams: Fraudsters pose as IRS agents, company executives, or suppliers, using professional language and urgent requests to push payments or data transfers. These scams are especially effective when they mirror your actual business relationships.
- Directory Scams: Scammers contact you about an advertising or business directory listing that supposedly needs renewal. They send an invoice or “proof” of a previous order, hoping you will pay without checking.
- Fake Domain Name Renewals: You receive an urgent notice that your website domain is about to expire. The scammer offers to “renew” it for a fee, but the payment does not reach your legitimate registrar.
- Fake Trademark Protection: A caller or email warns that your business trademark is about to lapse or is about to be seized by another business and insists on immediate payment for renewal or protection services. In reality, these organizations have no connection to the U.S. Patent and Trademark Office.
Warning Signs of Impersonation-Based Scams
Once you know the signs, impersonation attempts become easier to identify.
- Unexpected Communication from Authorities: The IRS, Secretary of State, and other agencies rarely call or email directly about payments or renewals.
- Requests for Immediate Action or Secrecy: Scammers often tell you not to discuss the matter with anyone else to prevent you from confirming authenticity.
- Minor Inconsistencies: Slight differences in sender email addresses, phone numbers, or logos are often overlooked but reveal that something is wrong.
- Emotional Triggers: Messages that invoke urgency, fear, or pride in protecting your company’s reputation are designed to make you act without thinking.
How to Prevent Impersonation-Based Scams
The key to preventing impersonation scams is consistent verification. Assume that every unexpected request, even one that appears legitimate, deserves a second look.
- Set Clear Communication Rules: Establish internal procedures for approving payments and sharing sensitive information. If a message falls outside those norms, verify before responding.
- Verify Identities Through Trusted Channels: Never rely on contact details provided in an email or text. Use official phone numbers or websites to confirm legitimacy.
- Educate Your Team: Train employees to recognize authority-based scams and to feel confident pausing any transaction that seems irregular.
- Secure Company Information: Limit the amount of internal information available online. Scammers use public data to craft realistic impersonations.
- Document Vendor and Partner Contacts: Maintain a verified list of vendor representatives and their official contact information to minimize confusion when invoices or messages arrive.
4. Other Common Small Business Scams
While cyber, payment, and impersonation scams make up the bulk of business fraud, other schemes continue to circulate and evolve. Many of these target small businesses because they rely on trust and quick decisions to keep operations running smoothly.
Loan or Grant Scams
Nearly one-third of small businesses experience fraudulent lenders or scams during the lending process, Experian reports. These schemes often promise quick approvals or government-backed funding but require upfront fees or sensitive financial details. Legitimate lenders never charge large payments before releasing funds, so always verify offers through trusted institutions like your bank or the Small Business Administration (SBA) before sharing information.
Charity Scams
Fraudulent charities use emotional appeals, claiming donations will support relief efforts or community programs. They often reach out after major disasters or during high-profile fundraising seasons. Before donating, verify organizations through legitimate directories such as CharityNavigator.org or the IRS Tax-Exempt Organization Search to ensure your funds reach real causes.
Vanity Award Scams
In these scams, your business is congratulated for earning a prestigious award that conveniently requires a payment to claim. The promised recognition, trophies, or publicity never materialize. Genuine awards are based on merit and never demand fees, so treat any paid “honor” with skepticism.
Review Scams
Scammers exploit the value of online reputation by offering to sell positive reviews or by threatening to post negative ones unless you pay. Buying or negotiating reviews violates most platform policies and can damage credibility. Report coercive messages directly to the review site or the Federal Trade Commission instead of engaging.
Utility Disconnection Threats
In this scam, someone posing as a utility representative claims your service will be cut off unless payment is made immediately, often through wire transfer or prepaid cards. Real utility companies provide multiple written notices before any disconnection and never demand unconventional payment methods. Hang up and contact your provider directly using the number on your billing statement.
What to Do if You Think You’ve Been Exposed to a Small Business Scam
Now that we’ve covered how to prevent small business fraud and scams, let’s take a look at your next steps if you think you’ve been exposed to one and how to report business scams.
Report to the FTC
Start by reporting the incident to the Federal Trade Commission (FTC) at ReportFraud.ftc.gov. The FTC tracks patterns of business fraud and shares information with law enforcement to identify repeat offenders. Include as much detail as possible, such as dates, communications, payment methods, and copies of any invoices or emails, to strengthen your report. While the FTC cannot resolve individual cases, your submission helps protect other businesses and may contribute to investigations that stop larger operations.
Alert Your State Attorney General
Your state’s attorney general can take action against business-related scams that fall within state jurisdiction. Many offices provide online complaint forms and may offer direct support or mediation when losses occur locally. Visit NAAG.org to find the contact information for your state attorney general’s office and file a report promptly. Quick reporting helps authorities issue alerts and pursue legal action against active scams.
Contact Local Law Enforcement
If money has been lost, your business data has been compromised, or you suspect criminal activity, contact your local police department or sheriff’s office. A formal police report creates an official record of the incident and may be required by your bank, insurer, or cybercrime unit if recovery efforts are possible. For significant financial losses or cyber intrusions, the police can coordinate with federal agencies such as the FBI’s Internet Crime Complaint Center (IC3).
Work with a Pro
If your business has shared information, transferred funds, or experienced system access issues, bring in professionals immediately. An IT security specialist can assess your systems for breaches and help you recover safely. Your accountant or bookkeeper can review recent transactions to spot irregularities and document losses. In serious cases, consult your bank and law enforcement as soon as possible to attempt fund recovery.
The sooner you take these steps, the more control you regain. Treat every potential scam as a learning opportunity, tighten internal processes, update training, and use the experience to build resilience into your operations.
Ensure You Have Capital to Shore Up Your Scam Prevention Strategy
Small business scams are unfortunately very common and can be costly, but thankfully, they are often preventable. If you’d like to invest in tools, training, or insurance to protect your business, but have limited working capital due to slow-paying clients, rapid growth, or seasonality, invoice factoring can help.
Instead of taking out a loan that must be paid back with interest, factoring provides you with an instant payment on your unpaid B2B invoices. There’s no money to pay back because you’re simply accessing the cash you’ve already earned faster. To learn more or get started, request a free rate quote.
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