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Additional Guidance Provided for PPP Loans as Policing of Funds Begins

The Payroll Protection Program (PPP), established as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, extended a lifeline to businesses during the COVID-19 pandemic by making more than $650 billion dollars in loans available along with the opportunity for full loan forgiveness if certain criteria are met. This amount of money, however, brings an increased likelihood for scrutiny from the Federal government.

The Small Business Administration (SBA) released additional guidance on May 13, 2020, addressing questions that lenders and borrowers might have regarding the implementation of PPP. The guidance, in the form of a regularly updated frequently asked questions document, provides answers to 46 questions and includes example scenarios, expanded definitions, and clarification on business eligibility for loans. This guidance should help address some fears of investigation into businesses by better outlining what PPP compliance entails.

With that said, the possibility for investigation into businesses who have made use of PPP funds remains. The Trump administration has made clear they intend to do a full review of every loan over $2 million, and the Justice department has signaled its intent to scrutinize loan applications and uses in an effort to police the funds. A publicized abuse of the program by two men fraudulently claiming that they had dozens of (non-existent) employees will likely draw even more attention to those who have accepted the PPP loans.

Specific criteria hasn’t been provided for what might trigger an investigation into a business that obtained a loan below the $2 million threshold. Bearing that in mind, it would be wise for businesses to review their initial eligibility for the loan, ensure that they have  documentation supporting the necessity of the loan, prepare financial forecasts for how the pandemic is expected to impact business, and be prepared to address how the funds, or lack thereof, may have impacted the maintenance of the employer’s workforce.

If you need guidance on how to comply with PPP requirements or how to best prepare for an investigation, please contact your McBrayer attorney.

AT MorganAnne-Tyler Morgan is a Member of McBrayer law.  Her law practice primarily focuses on politics, elections, and campaign finance, nonprofit institutions and associations, foster care and adoption, administrative law, healthcare law, pharmacy law and transactional healthcare and transactional agreements. Ms. Morgan can be reached at atmorgan@mcbrayerfirm.com or (859) 231-8780, ext. 1207. 

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This article does not constitute legal advice

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