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COVID-19: PPP and SBA Loan Fraud

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During the COVID-19 Pandemic, there have been opportunities for businesses to receive government funds to help maintain employees and cover costs during the economic slowdown brought about by the disease.  Businesses - such as restaurants, barbershops, and others - were forced to close their doors, and then to reopen at a very limited capacity.

The federal government assisted business owners with two programs - the Paycheck Protection Program (PPP) and the SBA (Small Business Association) Economic Injury Disaster Loan (EIDL).  Businesses were eligible to apply for and receive both.

The money is not unconditional and cannot be used however the loan recipient sees fit.  The PPP loan was specifically to cover payroll and some operating expenses, such as rent, utilities, and some other business costs.  The applicant was required to submit documentation proving the payroll costs and the loan was issued based upon the needs of the business owner.  The PPP can also be forgiven, becoming a grant that does not need to be repaid, as opposed to a loan that does.

The EIDL provided business owners with funds to cover payroll expenses after the PPP funds expire, as well as cover business operating costs. A business owner, even a sole practitioner, can pay themselves a salary from the EIDL funds, but that salary is subject to taxes.

What you cannot do is use the funds however you want for purposes not permitted by the loan.  If you receive $50,000 in PPP funds for your business from the SBA and you go out and buy a car with that money, that is not a permitted use of the funds and you could be charged with fraud.

If you take your EIDL funds and go on a vacation or buy a boat, that too is fraud.

The SBA has disbursed funds specifically for certain business uses.  If you use that money for funds not permitted, the government considers that to be fraud.

If you are under investigation or have been charged with fraud related to the PPP or EIDL loan programs, contact me.