The Paycheck Protection Program offered financial relief for small businesses to help them maintain their payroll and other business expenses during the Coronavirus pandemic when quarantines and shutdowns led to serious economic challenges. Unfortunately, fraudulent applications have led to federal charges for some businesses.
Understanding the basics of fraudulent actions under the Paycheck Protection Program can help you determine how best to protect your business.
The loan program prohibits obtaining loans from more than one SBA lender. Doing so is loan stacking and leaves you subject to fraud charges.
Paycheck Protection Program loans benefit small businesses which, for the purposes of this funding, means businesses with 500 employees or less. Intentionally misclassifying employees as independent contractors for eligibility is fraudulent.
Payroll cost misrepresentation
Paycheck protection loans feature a benefit cap of two months of the company’s average payroll for a month with a 25 percent supplement. Misrepresentation of your payroll figures in an effort to receive a higher loan amount may lead to fraud charges.
Obtaining a paycheck protection loan and the subsequent forgiveness requires certification that your company requires the loan to support its ongoing operations due to the current economy. You must also certify that you complied with all terms of the loan, including the restricted use of funds primarily for payroll, rent, insurance and utilities. False certifications qualify as fraud.
Understand the program guidelines, the federal restrictions and the necessary requirements to meet the Paycheck Protection Program forgiveness guidelines. Adhere to those standards to protect your company against fraud claims.