Big concerns about small business loan pitches

Many small businesses are looking for a financial life preserver to help them stay afloat until the COVID-19 wave subsides. But joint warning letters just sent by FTC staff and the Small Business Administration raise concerns that some companies – including lead generators – are making questionable claims about their affiliation with SBA-administered programs designed to offer emergency relief to struggling businesses. And the URL some of them are using is just part of the problem.

Funded by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Paycheck Protection Program is designed to help small businesses keep people employed. Small businesses may apply for PPP loans through Small Business Administration-authorized lenders or other lenders SBA has determined to be eligible.

The warning letters from FTC staff raise concerns about websites that “may be unlawfully misleading small business consumers about federal loans or other temporary small business relief,” in violation of the FTC Act. One letter went to IT Media Solutions, LLC, of Santa Monica, California. The company’s website has prominently claimed “Your Paycheck Protection Program Loan starts here.” Inviting people to “Get Started” with their PPP loan applications, the site has further promised to “connect you to our large nationwide network/marketplace of approved PPP (Paycheck Protection Program) lenders.” Oh, and what URL has IT Media Solutions used to convey those claims? You guessed it: sba.com.

A second warning letter to Utah-based Lendio, Inc., raises concerns with advertising and marketing by, or on behalf of, Lendio, including by IT Media Solutions on sba.com and by Merchants Advance Network, Inc., on manfunding.com. In addition to the same claims cited in the letter to IT Media Solutions, the letter to Lendio mentions representations that Merchants Advance Network has made – specifically that the company is an authorized SBA loan packager that “only charge[s] a nominal fee of $495 per business” and “will work with you hand-in-hand to apply you for ALL eligible relief products that the SBA has to offer.”

The letters outline FTC staff’s concerns that these claims suggest – among other things – an affiliation or relationship with the SBA and approved PPP lenders and that consumers (in this case, small businesses) can get PPP loans by applying through these sites. “To the extent that any of these claims are not truthful, omit material information needed to prevent the claims from misleading consumers, or are not substantiated,” they would violate the FTC’s prohibition on unfair or deceptive acts or practices.

In addition, the letter to Lendio cites Merchants Advance Network’s statement that it “only charge[s] a nominal fee of $495 per business.” The letter notes that “agents, including lead generators and others providing PPP application assistance, are prohibited from charging fees to PPP loan applicants, either directly or by taking a fee out of the loan proceeds.”

According to the letters, the companies should take immediate action by reviewing and monitoring all advertising and marketing to ensure deceptive claims are removed. That includes claims conveyed expressly or by implication through websites, social media, email, telemarketing, and texts. FTC staff expects to hear back from them within 48 hours about the actions they have taken to address these concerns.

In just two months, the FTC has sent dozens of warning letters and filed two law enforcement actions regarding coronavirus claims. Our message to businesses struggling with economic upheaval is that we’re working hard to challenge deceptive claims that may target them. To companies that may be tempted to use questionable tactics to exploit the COVID crisis, our message is that we’re monitoring the marketplace very carefully. Deceptive express or implied statements about an affiliation with the SBA and promotions that charge fees to applicants seeking PPP loans will attract close scrutiny.

Looking for accurate information about the Paycheck Protection Program? Don’t respond to a pitch in an unsolicited email or rely on an unfamiliar link in a web search. Go straight to the source: the Small Business Administration’s Coronavirus Relief Options page. For additional resources for your company, visit the FTC’s page, Business Guidance During Coronavirus.