AI-Generated Fraud Creates New Challenges for SBA Lenders

September 19, 2025

Bob Coleman
Founder & Publisher

AI-Generated Fraud Creates New Challenges for SBA Lenders

SBA lenders are confronting a new and dangerous wave of fraud, one that is nearly impossible to detect with the human eye. AI is transforming both the tactics of fraudsters and the strategies lenders must use to fight back.

During the pandemic, programs like the Paycheck Protection Program (PPP) pumped billions of dollars into the economy. With so much money moving quickly, fraud was inevitable. Early schemes were relatively crude fake bank statements bought online or real documents altered with basic editing software. While damaging, these tactics were often caught by experienced lenders who knew what to look for.

That is no longer the case. Fraudsters have dramatically upgraded their tools. Today, with just a few clicks, they can generate fake bank statements, tax returns, and other financial documents that are virtually indistinguishable from the real thing. Five years ago, lenders could identify 85% of fraudulent statements by sight alone. Today, that number has dropped to just 5%.

One of the most common examples is a fabricated bank statement. A borrower can now create a completely fake three-month statement from a major bank, complete with accurate routing numbers and realistic balances, in a matter of seconds using AI. These forgeries are so convincing that even the most seasoned lenders can’t spot them without direct verification.

Tax documents are also being targeted. AI can produce Schedule C tax returns that appear entirely authentic. Detecting these fakes requires a more investigative approach. Lenders must dig into the numbers, looking for unusual patterns or identical figures repeated across multiple borrowers. A quick review is no longer enough to uncover fraud.

This rise in sophisticated fraud comes at a time when SBA lending itself is changing. Many lenders now operate on a national scale, processing applications from borrowers they’ve never met in person. In the past, local bankers often knew their customers personally, visited their businesses, and built long-term relationships, which made it easier to spot red flags. The shift to remote lending removes that safeguard, giving fraudsters more room to operate undetected.

To fight back, lenders must strengthen verification practices, confirm account balances directly with banks, and train staff to spot red flags tied to AI-generated fraud.

AI has transformed industries, but in the wrong hands, it’s a weapon. As fraudsters grow more sophisticated, traditional detection methods won’t keep up. Lenders who fail to adapt risk falling behind while fraudsters stay a step ahead.

Watch Fraud Friday (broadcasting from FLAGGL in Orlando) here!