SBA re-launches PPP with new fraud controls

The first two rounds of the Paycheck Protection Program were helpful to many companies, but there was evidence of fraud and other irregularities. Now, the Small Business Administration has announced a slightly more complex verification program for new applications.

An additional $284 billion in potentially forgivable PPP loans were authorized in a relief bill in December. Senior administration officials told Reuters that this is estimated to be enough to meet demand and is not expected to run out.

The new round of PPP will initially open to community financial institutions and then later to other types of lenders.

In the previous two rounds of PPP lending, applications were apparently approved automatically upon submission. Now, the SBA will slow the approval process slightly, vetting applicants’ information and submissions overnight and running an identity and data verification check.

During those two previous rounds, the SBA lent approximately $525 billion. While the program was advertised as an effort to help small businesses who were struggling during the pandemic, congressional investigators and government watchdogs say that many large, listed companies, blacklisted companies and outright fraudsters were able to get cash from the program.

The Justice Department, in concert with other agencies, has charged over 80 people with theft from the program amounting to more than $250 million.

In addition to the new vetting that will be required, Congress made a couple of other important changes:

  • Small businesses who suffered a 25% or greater decline in revenues in 2020 can now apply for a second loan of up to $2 million.
  • Lenders won’t be subject to enforcement actions when they acted in good faith and complied with relevant regulations, even when borrowers break the rules of the program.

One critic of the changes complains that the PPP process has become much more complicated, and the added complexity could create new technical glitches.

You may be eligible for an additional PPP loan

Did your business suffer a decline of 25% or more last year? You could be eligible for up to $2 million in additional PPP funds. It’s a good idea to discuss the program’s requirements with an experienced business attorney to make sure you understand what to expect.