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How your PPP loan can create criminal exposure

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In the midst of the Coronavirus pandemic, the CARES Act provided the funding for the SBA to implement the Paycheck Protection Program (PPP) to provide financial assistance to businesses. While many jumped at the opportunity to receive financial support, the aftermath of business audits has made some regret they did. 

The CARES Act grants the government the flexibility to more easily audit businesses that received PPP loans. The positions that allow the government this power are known as supervisory entities and include the following 

  • Special Inspector General for Pandemic Recovery 
  • Pandemic Response Accountability Committee

Supervisory entities were put in place to prevent and detect fraud and abuse of PPP loans issued under the CARES Act. Businesses with discrepancies between their taxes and their loan requests are now facing serious repercussions.

The audits and investigations related to PPP loans will be conducted by the SBA. All documentation involved in these investigations must be retained for six years following. If it is determined that the recipient of a PPP loan was either ineligible or spent the loan on unapproved uses, they may be required to repay a portion, if not all, of the loan. Additionally, depending on the circumstances, the borrower’s case may be referred to the authorities for further civil or criminal punishment. 

On April 28th, Treasury Secretary Steven Mnuchin announced that ALL PPP loans over $2 million would experience a full investigative audit by the SBA. For many businesses, these SBA audits have become equally, if not more, daunting than IRS audits. 

The potential for criminal exposure has also become an issue with these SBA audits and investigations. The FBI has joined forces with SBA in conducting the audits and investigations of wrongly claimed PPP loans. While loan application discrepancies are likely to be the most common offenses, these audits bring light to various other concerns for some businesses. 

The government has a wide range of going after businesses that they suspect to have acted in bad faith. Businesses may face fraudulent charges connected to the CARES Act including:

Another option for businesses who received PPP loans is to begin the process of having their loan forgiven. As of October 8th, the U.S. Treasury in conjunction with the SBA released a simplified process for businesses that received $50,000 or less to have their loans forgiven. To qualify for such forgiveness the business must meet certain criteria to prove that they utilized the loan payment as it was intended, to support payments of employee payroll, and to pay other specified business expenses. 

If your business received a PPP loan and are unsure or think you may have filed incorrectly, contact John Milikowsky for support today! Prepare for an SBA business audit before it’s too late!