The coronavirus pandemic has hit small businesses very hard, as they were forced to close their doors to clients or limit their business activity to delivery-only. In an attempt to help companies to recover and prevent them from having to lay off workers, the U.S. Government launched the Paycheck Protection Program (PPP).
In simple words, the PPP is a form of loan designed for small businesses, organizations and self-employers, which aims to provide them with 8 weeks of cash-flow. In return, companies need to prove they are using these funds for payroll, mortgage interests, utility bills or rent.
While a PPP loan brings tremendous benefits to small businesses and freelancers all over the country, the recent buzz around it has also uncovered some fraudulent activities. This prompted the authorities to look deeper into the companies that requested PPP assistance, causing many to wonder if they can be investigated for fraud for simply applying for a loan under the PPP.
Experts at Oberheiden P.C. have received a multitude of questions regarding PPP loans and what can be considered fraud in this matter.
What qualifies as PPP fraud?
The program provides a range of benefits for businesses, which exposes it to fraudulent activities. These activities fall into three broad categories:
Loan necessity: if they want to apply for a PPP loan, business owners must certify that the current economic conditions are affecting their business and make this loan necessary to support their ongoing operations. If the applicant gives false testimony, and it is proven that they would not need this loan, they could face criminal prosecution.
Loan amount: the amount of the PPP loan is supposed to be 2.5 times the average monthly payroll costs of the business. This way, companies can cover 2.5 months of employee paychecks and attempt to get back on their feet during these uncertain times. If the applicant overstates payroll costs, to obtain more substantial amounts of money, they are subject to facing criminal prosecution
Eligibility criteria: To qualify for a loan, the applicant must meet some eligibility criteria, such as being in business at least since February 15, 2020; qualifying as a small business or proving that no owner of 20% or more of the company was subject to criminal charges or convictions in the past five years. If the applicant falsely testifies to meeting these criteria, this could lead to being charged with fraud.
How can companies build their defense, if they are investigated for potential fraud?
Given the recent events where two individuals were already charged for filing a fraudulent loan application, it is only natural that the government will want to look into any potential fraud that can be connected to a PPP loan.
As the experts at Oberheiden P.C. advise, you should always contact a reputable lawyer to help you handle federal changers. They will be able to prove certain circumstances created the need for a loan, or that an innocent mistake was made. Whatever the details may be, if you are faced with a potential fraud investigation, contacting an attorney is your best chance at protecting your company and reputation.
