Wolverhampton Council officers are investigating 19 cases – totalling just over £200,000 – where grants were handed out after the coronavirus lockdown was introduced in March.
Authority fraud officers said some beneficiaries are suspected of either claiming to operate from empty properties or had given addresses where they previously traded from.
A report to the council's audit committee, which met on Monday, said more than 4,000 grant applications were processed and £47 million paid out to help companies through the coronavirus crisis.
It also said 180 applications were rejected for reasons including ineligibility, failure to submit appropriate evidence and duplication.
Prior to paying out, the council said a range of measures were used to check the validity of claims and now a post-payment process is being undertaken to assess the applications.
As well as the 19 being investigated, a further 10 payments are currently being withheld as officers await further information from the claimants.
Audit bosses said they were confident of recovering money that should not have been paid out.
Principal counter fraud officer Mark Wilkes said: “The ones suspected of fraud were where previous tenants were actually applying for the grants.
“So, in certain cases businesses had moved out of premises and not told us and then applied for the grant.
“We either stopped payment or if they did get through, we are looking at them and will get the money back.
“Others included empty properties where somebody tried to claim they were running a business from.”
Peter Farrow, head of audit, added: “It is something we don’t want to have done. The percentage is very small but some have possibly slipped through the net.
“We are working our way through those and we are pretty confident we will be able to at least attempt to recover monies where we may have paid it out inadvertently – either through fraudulent applications or in error.”