There is increasing concern among the recipients of Payment Protection Program (PPP) Loans about potential audits. This follows an estimate by the Small Business Association’s (SBA) Office of Inspector General that up to one-third of PPP Loans have shown signs of potential fraud.
According to the Interim Final Rule, the SBA has authorization to audit the compliance of all PPP Loan borrowers’ eligibility and other requirements put forward at the time of a borrower’s application. Audits involve an investigation into whether a business accurately calculated its loan eligibility or not and if the funds were used in accordance with the Coronavirus Aid, Relief and Economic Security (CARES) Act.
The SBA administered PPP Loans during the COVID-19 pandemic when the CARES Act was signed into law. They were used by small businesses that were struggling financially during the pandemic. Over 11.5 million PPP Loans were granted to millions of borrowers, some equating to the maximum loan amount of $10 million.
Businesses which used at least 60% of their PPP Loan to cover payroll expenses within 8 weeks – or 24 weeks for certain loans – after receiving the PPP Loan finds, are eligible for loan forgiveness.
For businesses that were not eligible for forgiveness, the PPP Loans are now becoming due. In March this year, the SBA began to refer approximately $20 billion in delinquent PPP Loans with balances under $100,000 to the Treasury Department for collection. An additional 10,000 delinquent PPP Loans with balances above $100,000 have also been submitted.
As the legal intelligence news resource JD Supra informs, if the SBA decides to conduct an audit, notice will be sent to the lender, which will subsequently provide notice of the audit to the borrower within five business days. To help prevent any potential delays within the audit process, JD Supra suggests that PPP Loan borrowers work with their attorneys to start compiling the documentation that is likely to be requested during the audit.
This article, "PPP Loan Audits Could Impact Millions of Small Business Borrowers" was first published on Small Business Trends
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