The quick read: A real commercial lender normally puts its terms in writing before it takes your money, and the deposits it does ask for pay named third parties such as the appraiser and the lender's counsel. A fee demanded before any term sheet exists, wired to an individual, or tied to buying a standby letter of credit is the advance-fee pattern. Stop, verify, and report it.
What is an advance-fee loan scam on a commercial property loan?
An advance-fee loan scam on a commercial property loan is a fake lender or arranger that promises financing, then demands money before any real loan exists, calling it a processing, insurance, due-diligence or underwriting fee. Once the wire lands, the lender disappears or invents a second fee, and no loan ever funds.
The FBI's Internet Crime Complaint Center defines advance fee fraud in its 2025 annual report as a case where "an individual pays money to someone in anticipation of receiving something of greater value in return but instead receives significantly less than expected or nothing." That report counted 7,762 advance fee complaints in 2025, with reported losses of $155,910,852. Those figures cover every kind of advance-fee scheme, not only loans, and the report does not break out commercial real estate, so treat them as the floor of a reported problem rather than a measure of commercial lending fraud.
The commercial version is not new. The Connecticut Department of Banking warns that "small businesses have been charged as much as several thousand dollars as an advance fee for a loan," and that "whether you are an individual consumer or an owner of a small business, the result is the same." On a property loan, a scam can scale its fee to the size of the loan, so a borrower chasing a multimillion-dollar bridge loan may be told a large due-diligence fee is normal.
The targets are predictable. Borrowers who have just been declined by a bank, sponsors racing a purchase deadline, and owners facing a maturity they cannot refinance are all short on time and willing to believe a lender who says yes quickly. The scam is built to exploit exactly that pressure.
What red flags separate a fake commercial lender from a real one?
The red flags that separate a fake commercial lender from a real one are timing and direction of money: a real lender issues a term sheet first and collects itemised third-party costs later, while a scam wants an unexplained fee, often wired to an individual, before any written terms exist. Use the table below.
Request-by-request comparison, real lender vs. scam pattern:
| Request | What a legitimate lender does | What the scam pattern looks like |
|---|---|---|
| Money before terms | Issues a written term sheet or application first; deposits come after you sign it | Wants a processing, insurance or due-diligence fee before any written terms |
| Who gets paid | Lender entity or named vendor, such as the appraiser or title company | A personal account, a newly formed entity, crypto or a gift card |
| Approval language | Conditional: subject to appraisal, underwriting and credit approval | Guaranteed or pre-approved before anyone has read the rent roll |
| Proof of funds | Verifies your liquidity from bank and brokerage statements | Requires you to buy or lease a standby letter of credit or proof-of-funds letter from a provider it names |
| Quoted rate | Prices against the market for the loan type, leverage and sponsor | Far below published rates, with no conditions attached |
| Contact and pressure | Answers questions, provides an address and references, works to your closing date | Unsolicited, urgent, fee must be paid today or the slot is lost |
| Wire instructions | Confirmed by phone at a known number, unchanged through closing | Changed by email at the last minute |
| Paperwork | Itemised deposit with a stated use and written refund terms | A lump sum with no breakdown and no refund terms |
One red flag is a question; two or more together are a pattern. The single most reliable test is the first row. The FTC's guidance on advance-fee loans is blunt: "Don't pay for a promise," and "nobody legit will tell you that paying a fee guarantees that you'll get a loan." If someone has not yet put terms on paper, you have nothing to pay for.
Ask for verifiable facts you can check yourself: the lender's full legal name, its office address, a phone number you can find independently, and recent closed loans you can confirm through public records or the borrower. A real lender expects these questions. A scam answers with urgency, vague references and a fresh deadline.
Which fees can a real commercial lender ask for before closing?
A real commercial lender can ask you to fund third-party costs such as the appraisal, environmental and property reports, and its legal counsel before closing, but normally after you sign a term sheet, with each item listed, and paid to the lender or a named vendor rather than to an individual's account.
The regulators draw the same line. The FTC notes that real lenders "can require an application or appraisal fee before they consider your loan application," while still never tying a fee to a guaranteed approval. The Connecticut Department of Banking says legitimate mortgage-lender fees "seldom are required before the lender is identified and the application completed," and that "the fees generally are paid to the lender, not to the broker or arranger."
In commercial lending, the order of events is what protects you:
Step 1: You submit the deal and the lender reviews it.
Step 2: The lender issues a term sheet or letter of intent with rate, leverage, term and conditions in writing.
Step 3: You sign it, and the lender asks for a deposit to cover named third-party work.
Step 4: Reports are ordered, underwriting finishes, and the loan closes or the deposit is accounted for under the written terms.
Whether that deposit comes back if the deal dies depends on the refund terms you signed, which is one more reason to read the term sheet clauses that determine your deal before you wire anything. For spotting a scam, what matters is that a legitimate deposit follows written terms and is itemised. A fee demanded before step 2, beyond a disclosed application or appraisal fee, is the warning.
Why are proof-of-funds and standby letter of credit demands a warning sign?
Proof-of-funds and standby letter of credit demands are a warning sign when the lender requires you to buy, lease or rent the instrument from a provider it names, because real commercial lenders verify your liquidity from bank and brokerage statements and do not make you purchase a financial instrument to unlock a loan.
The scheme runs in a familiar sequence. The fake lender issues an impressive commitment letter, then says funding requires a standby letter of credit, a bank guarantee or a proof-of-funds letter. You are steered to a specific provider that will lease the instrument for a percentage of its face amount. The fee is paid, the instrument is rejected or never issued, and a new fee appears.
What a legitimate lender asks for instead:
Liquidity check: recent bank and brokerage statements showing the sponsor's cash and reserves.
Net worth check: a personal financial statement, supported by schedules of real estate owned.
Equity check: evidence that the down payment or equity contribution is in your account before closing.
None of those require you to pay a third party chosen by the lender. If the instrument has to come from the lender's own contact, the instrument is the product being sold.
How can a quoted rate be too good to be true?
A quoted rate is too good to be true when it sits well below what lenders are publishing for the same loan type that week, arrives before anyone has seen a rent roll or appraisal, and comes with a guarantee, because real pricing depends on the property, the leverage and the sponsor.
Scams lead with price because price is what a stressed borrower wants to hear. A bridge borrower who has been quoted double-digit rates elsewhere is told a lender can do the deal at a permanent-loan rate with no prepayment penalty, if a fee is paid today. Check any quote against a dated benchmark such as our commercial real estate rates page, and ask what conditions the rate depends on.
A real quote is conditional and specific. It names the loan amount, leverage, term, index or fixed rate, spread, fees, prepayment terms and the conditions to close. A scam quote is unconditional and vague, because there is no underwriting behind it to be specific about.
What should you do if wire instructions change before closing?
If wire instructions change before closing, stop and confirm them by phone with the title company or lender at a number you already had, not one in the new email. Business email compromise reroutes closing funds by impersonating the people you expect to hear from, and money sent by wire is hard to recover once it moves.
This is the fraud a real deal is most exposed to, because it does not need a fake lender at all. The FBI's 2025 Internet Crime Report counted 24,768 business email compromise complaints with reported losses of $3,046,598,558, and wire transfer or ACH made up 86% of the transaction types reported in those complaints.
Speed matters if money has already gone. The same report says the IC3 Recovery Asset Team worked 3,900 incidents in 2025 and froze $679,013,183, a 58% success rate, and its guidance is that "time is of the essence": contact your financial institution immediately and request a recall of the funds, then file a complaint with IC3 with the full transaction details.
Build the habit into every closing. Agree at the start which person at the title company or lender will confirm wire instructions, write down their number from a source you trust, and treat any change sent by email as suspect until you have spoken to that person.
How do you report a commercial loan scam?
Report a commercial loan scam to the FTC at ReportFraud.ftc.gov, to the FBI's Internet Crime Complaint Center at ic3.gov, and to your state's banking or financial-institutions regulator, and call your own bank at once if money has already moved, because a fast recall request is the best chance of freezing it.
Where each report goes and what it does:
Your bank: request an immediate recall of any wire or ACH, and ask for the fraud department.
FBI IC3 (ic3.gov): file with the full transaction details; IC3 may be able to help banks and law enforcement freeze funds.
FTC (ReportFraud.ftc.gov): the FTC's advance-fee loan guidance says to report it there.
State regulator: the Connecticut Department of Banking, for example, tells borrowers to contact it before paying any money to a lender and to contact it as soon as possible after a loss.
Keep everything: emails, term sheets, wire confirmations, phone numbers, and the names the scammers used. A federal rule shows how regulators view the core tactic. Under 16 CFR 310.4(a)(4), a seller or telemarketer may not request a fee in advance of a loan when it has guaranteed or represented a high likelihood of success. That rule has limits for commercial borrowers: 16 CFR 310.6(b)(7) exempts most telemarketing calls to a business, so do not rely on it for protection. Rely on the order of events instead.
How do you get real lenders competing for your commercial loan?
You get real lenders competing for your commercial loan by sending one complete package to several lenders at once and comparing written term sheets, without paying anyone for a promise. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing.
YieldStack is a commercial mortgage brokerage, not a lender. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed. If you are comparing intermediaries as well as lenders, our list of questions to ask a commercial mortgage broker covers that side. Share your deal for real lender review
The bottom line
A real commercial lender earns money by closing loans, so it puts terms in writing first and asks for itemised third-party deposits only after you sign. An advance-fee scam earns money before anything exists, so it asks for a fee up front, pushes urgency, steers you to buy instruments from its own contacts and changes wire instructions by email. Never pay for a promise, confirm every wire by phone, and report any attempt to the FTC, IC3 and your state regulator.