SBA urges companies to justify using PPP loans

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The Small Business Administration is sending out questionnaires to companies that received Paycheck Protection Program (PPP) loans during the pandemic, requesting new business details to justify the aid and loan default.

The SBA says the reviews “maximize program integrity and protect taxpayers’ resources” on loans greater than $ 2 million. The new initiative requires banks to send the questionnaire replies back to the agency within 10 days.

The SBA began distributing “Loan Need” questionnaires last week to companies and nonprofits that have taken out forgivable PPP loans.

The new corporate questions – which borrowers must complete within 10 business days of receipt – ask for details of gross earnings, capital improvement projects, dividend payments, and compensation, including whether employees have earned more than $ 250,000.

The agency said in the document that the information “will be used to notify the SBA’s review of your trust certificate that economic uncertainty has made your loan application necessary in support of its day-to-day operations”.

Failure to complete the form may result in the SBA determining that a company was ineligible, and the agency may request a refund “or other available legal remedies,” the SBA said on the form.

Incorrect information in the questionnaire will result in heavy penalties, with the penalty ending with a “prison sentence of up to 30 years and / or a fine of up to 1,000,000 US dollars,” according to the form.

The program created by the CARES Act approved more than five million PPP loans totaling $ 525 billion in emergency funding for small businesses suffering during the pandemic.

Now that companies and their accountants start applying for loans for the PPP loans, they and the banks that made the loans fear that their responses may jeopardize the anticipated forgiveness. PPP loan recipients are eligible for waiver if they have spent at least 60% of the proceeds on salary expenses. Companies that fail to meet the amount may be eligible for partial waiver under the CARES Act and SBA rules.

The Trump administration announced a review of the program in late April after it became known that public companies like Shake Shack and Ruth’s Hospitality Group were among the first to receive PPP loans. This news sparked a public outcry as the first wave of PPP funding ended.

Congress later approved more money for the program, which left nearly $ 134 billion unused, when the SBA’s lending expired on Aug. 8.

The banks are now in the hotseat, and they are responsible for entering the companies’ answers to the new questionnaire into the SBA’s system.

The new process “could be a real mess for lenders and borrowers alike,” the National Association of Government Guaranteed Lenders (NAGGL) said in a statement. Participation in PPP “becomes a riskier proposition for lenders and borrowers with every new policy change.”

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