You receive a call, email or letter from the federal government stating that you have won a free U.S. grant. To receive the money, you must pay a processing fee.

How do you know if the grant offer is legitimate or a scam? In this situation, it’s wise to recall two adages: 1) If it appears too good to be true, it probably is, and 2) there is no such thing as a free lunch. According to the U.S. Department of Justice, FBI and other Federal Agencies, fake U.S. grant scams are on the rise across the country.

Here are five ways to spot a grant scam:

1. Did you apply for a grant? Legitimate grants do not appear at your door as a surprise—you must apply for them. So, if you are offered a grant you know nothing about, most likely it is a scam.
2. Is a fee involved? Grant applications are usually free as they are sourced at the federal or state/county level with public funds. If you are asked to submit a fee to apply for the grant or learn more about it, there’s a good chance it is a scam. Asking for an application fee is the number one way scammers make money.
3. Is the grant for business or personal use? U.S. grants to a business or nonprofit are for the sole benefit of the company. If the grant is for school, living or other personal expenses, that’s an immediate red flag that it is not legit.
4. What agency does the issuer represent? Although it may sound impressive if they are from the Federal Grants Administration, there is no such office, so the offer is a scam.
5. Were you asked for either your personal or your company’s ID or your bank account information? When asked for this info, ask the caller for the proposal in writing. Chances are you will never hear from them again.

Who Offers Legitimate Grants?

There are a few federal grant programs for for-profit companies and many state/county economic development financial assistance programs. At the federal level, the SBA has disaster recovery grants—think Hurricanes Helene and Milton.

Also, some agencies, like National Institutes of Health and the Defense Department, participate in the Small Business Innovation Research program which helps companies research tech innovations for possible commercialization in areas that are of interest to these agencies.

At the state/county level, there are many financial assistance programs that foster company and job creation in their respective geographic areas. These take the forms of loans, equity investments and occasionally grants.

How to Verify a Grant’s Legitimacy:

1. Check Official Sources:
   Visit Grants.gov or the official website of the alleged granting agency (ending in “.gov”) to confirm the grant’s existence and terms.
2. Consult Trusted Advisors:
   Contact your local Small Business Development Center (SBDC), Women’s Business Center, or talk with a SCORE mentor. They can help you verify whether a grant is real or assist you in finding legitimate opportunities.
3. Review Communication Channels:
   Legitimate agencies rarely initiate contact via unsolicited phone calls, social media messages, or personal email accounts. Expect official communication from “.gov” email addresses and in response to a specific grant application you’ve submitted.
4. Check for Red Flags in Communication:
   Be wary of poor spelling, grammatical errors, and high-pressure tactics urging you to act immediately. These are common signs of a scam.

Questions to Ask About a Legitimate Grant (or You Won a Legit Grant—Now What?)

When you are the fortunate recipient of a legit U.S. grant, make sure you understand its purpose and requirements upfront.

• What can the money be used for? Most grants are not general-purpose funds, to be used for whatever the company determines. They are for specific purposes that meet the mission of the grantor. Make sure the grantor’s mission and your mission are in sync.
• What portion of the grant can be used for “overhead”? Grants are provided to undertake projects and activities. It takes administrative support to accomplish this, so make sure you understand what amount of the grant can be used for that.
• What is the timing of the payments? Many grants are provided upfront, so the company has the funds in hand to pay for the work. However, some grants are paid when agreed-upon milestones are accomplished or when specific expenditures need to be reimbursed.
• What are the reporting and compliance requirements?
  You may need to submit periodic financial and performance reports. Keep accurate records of how funds are spent, as audits or reviews may occur.

If You Suspect a Scam:

• Report it to the Federal Trade Commission (FTC) at ReportFraud.ftc.gov.
• File a complaint with the FBI’s Internet Crime Complaint Center at www.ic3.gov.
• Contact your state attorney general’s office for further assistance.

Key Lessons

• Unsolicited grants are often scams. If you didn’t apply for it and it requires money upfront, beware.
• Legitimate grants will be listed on official websites, require a formal application, and never demand upfront fees.
• When you receive a legitimate grant, ensure you understand and can meet all requirements, keep thorough records, and maintain compliance.
• If in doubt, seek guidance from trusted resources like SCORE mentors and your local SBDC.

Need Help?

Connect with a SCORE mentor for one-on-one guidance on identifying and applying for legitimate grants. Visit SCORE.org to find a mentor near you.