In the earlier rounds of 2020 stimulus, over 5.2 million small businesses borrowed over $500 billion in loans, those forgivable through the Paycheck Protection Program (PPP) under certain conditions. Now several months later, nearly 2,000 of the companies which received those loans are under investigation in suspicion of misconduct or criminal fraud relating to the loans, accounting for somewhere around $3 billion in loans.
The original Paycheck Protection Program had lax lender due-diligence to get the money out as quickly as possible, and people expected some of those loopholes to be closed in the new massive 6,000-page stimulus bill, but they haven’t been. The new pandemic aid bill, which totals to $900 billion, is funneling $284 billion into the PPP with the same risks for fraudulent activity as before.
While $3 billion out of over $500 billion sounds like small change, experts are certain that is only the fraud that has been found so far.
“Prevention is always better than detection,” said Bruce Dorris, chief executive of the Association of Certified Fraud Examiners. “There will be tens of billions of dollars in fraud that we’re gonna find in the first round of funding.”
To legally take a loan from the current PPP program, businesses must have between 2 and 300 employees, and have a demonstrable loss in revenue of at least 25 percent between the same quarters in 2019 and 2020. One major change that many wanted to see after the first bill, which is present in the new one, is that publicly traded companies are no longer eligible at all.
New, more scrupulous regulations could still enter the process via the Small Business Administration, which is in charge of determining the actual application process. A spokesperson for the SBA says that that work is underway, but the SBA only has 10 days after the December 30 signing of the bill to begin dispensing funds.