Most forgivable stimulus loans won’t be subject to federal audit
Only PPP loans above $2 million will be subject to full review to determine their validity, officials say.
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The federal government won’t conduct a review of most taxpayer-funded forgivable loans issued under the Paycheck Protection Program, Just the News has learned.
The forgivable loans are issued by approximately 5,100 Small Business Administration partner lenders and funded by the federal government as part of the $2.2 trillion CARES Act.
The loans are forgiven if they are used for qualified expenses such as payroll, rent, and utilities.
According to the SBA, forgivable loans under $2 million won’t be reviewed by the SBA or the Treasury Department.
In round 1 of the $350 billion PPP program, the majority (74%) of the forgivable stimulus loans were under $150,000. The average loan size was $206,000, according to SBA data.
In round 2 of the $310 billion in additional funding for PPP, most of the forgivable loans issued through May 1 were under $50,000 (71%), according to the SBA. Loans between $50,000 and $100,000 were 13.7% of loans issued, and the average loan size was $79,000.
Treasury Secretary Steven Mnuchin has said that forgivable loans above the $2 million threshold would be subject to a full audit as a way to spot potential fraud or inaccuracies on loan applications.
"To further ensure PPP loans are limited to eligible borrowers, the SBA has decided, in consultation with the Department of the Treasury, that it will review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the borrower’s loan forgiveness application,” Mnuchin and SBA Administrator Jovita Carranza said in a joint statement.
Companies were not required to demonstrate loss of income due to coronavirus to qualify for loans in the PPP program. Instead, companies seeking forgivable loans had to certify that their business was impacted by checking the relevant box on the SBA application form.
“If there are people out there abusing on this — you know, they’re making the same revenue as ever, there’s no reason to believe they won’t continue that — then you get in trouble for abusing the program,” said Sen. Marco Rubio, a key architect of the PPP program. “Some may slip through the cracks in that regard, but the overwhelming majority of this is going to people who really need it.”
The PPP program was designed for businesses with under 500 employees, but some companies with more employees were still able to qualify for loans if their individual locations had less than 500 employees. For example, Ruth’s Chris Steak House and Shake Shack have more than 500 employees, but both companies received loans. They have since returned the money following public criticism.
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