An investigation by the SBA or by the federal government is usually initiated based on information reported on a company’s PPP application. These agencies have made it clear that they could look into how the funds received from a PPP loan are used. The SBA will usually begin an audit as the first step in investigating the loan received. If your company is being investigated, it’s important to keep all documents associated with the loan including the application and receipts for transactions. The number of employees and any certifications needs to be maintained as well. There are guidances that are being released all the time pertaining to PPP loans and the overall process, so if you’re being investigated, then it’s important to seek legal counsel so that there is someone to help you through the process.
The SBA could open a claim if it receives information that a PPP loan could have been obtained in a fraudulent manner. An investigation can have a negative impact on your business and could result in losing your business license or having your business closed if you’re found guilty of fraud. You could lose customers even if your business doesn’t close, and your reputation could be tarnished. A defense attorney is often the best solution. You want to speak with someone who has experience with PPP loans and the SBA. If found guilty, you could face time in jail as well as significant fines.
Investigations have been launched since the start of the PPP loan process in order to obtain information about the validity of businesses that have obtained these loans. There have been federal investigations as a result for some businesses that are suspected of using funds in the wrong way or that have obtained the funds when they didn’t have a legitimate business.
When the SBA looks at applications, it can begin an investigation based on details like the number of employees reported payroll costs, and the type of business. Eligibility to receive a loan is at the forefront, but looking into the way that a business spends the funds given has also been an issue.
The First Steps
The first step that typically takes place is an audit by the SBA. Documents will usually be requested in order to determine if the loan was issued properly and if your business needed the loan. The SBA will also look at the statements made on the application and the details of requesting forgiveness. Conclusions that could be reached by the SBA include finding that your loan is satisfactory, finding that it was obtained fraudulently, or that you weren’t supposed to receive the loan at all.
You could be asked to pay back the loan if it’s determined that you weren’t supposed to receive one. You would need to pay the loan back within a certain timeframe if this is the conclusion made by the SBA. If a further investigation needs to take place, then the SBA could refer the case to the Department of Justice for a criminal investigation. A grand jury could be needed during the first steps of the investigation to look at whether or not you were eligible for the loan and if you committed any kind of fraud when applying for and receiving the funds. Interviews of your employees could be requested as well as all documents pertaining to the loan and how the money was spent.
This is a time when you want to hire the best representation possible. All information on the loan should match what you have for your business. The SBA is looking into businesses that applied for funds after the deadline, so if you were in this situation, you should be able to explain why you waited so long. Although the SBA can begin an investigation, individuals can report businesses that they suspect weren’t eligible to receive PPP funds.