It is no surprise that the on-going pandemic has affected all of us both mentally and financially. Many businesses which were blooming before the outbreak are now on the brink of collapse and bankruptcy.
According to many sources, 60% of the small scale business are expected to go down permanently within this year. Realising the kind of dangers faced by the corporate side, the government of the United States came up with a way to stimulate the economy and that is where the PPP loan initiative began.
Unfortunately, ever since new programs under the Flexibility and Cares Act was introduced, the whole sector has been plagued by fraudulent activities. Many people have been abusing the system and are spending money from the loan on luxurious items.
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On the other hand, the actual victims of the economic situation are having a tough time getting their hands on the cheques. In order to know more about the major highlights of the loan programs, continue reading our detailed post till the very end.
What is PPP Loan Fraud?
The numerous false claims made by many people using illegal valuation metrics and methods constitutes PPP Loan Fraud. The Federal Paycheck Protection Program was initially intended to serve people who suffered a deadly blow financially due to the stay at home orders.
Though the intention behind the program was noble, things took a drastic turn in the execution process. Due to the short time frame of implementation, the model was not checked extensively and that results in numerous loopholes which are exploited by many individuals.
This initiative provided an assistance of roughly around $520 Billion dollars to small businesses and instead of the government, banks were given authorisation to look after the distribution. The banks were not instructed to verify the details provided by the business owners and combined with time crunch, the cash quickly dried up.
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In case, if you are wondering, know that the program is yet to be renewed. There have been many crackdowns on the loan operations and few people have been arrested for fraudulent claims, but compared to the grand scheme, the numbers are not enough to conceal the damage.
All the regulatory bodies are doing their best to protect taxpayers money, but unless in-depth guidelines are given to them, the situation can never be expected to get better. With the on-going political tensions, it might take a lot more time than anticipated for the things to get better.
What is PPP Loan Forgiveness?
There seems to be a lot of confusion regarding the PPP Loan Forgiveness. Thankfully, the SBA has published a dedicated section addressing all kinds of questions regarding the program which you can access by clicking here.
If you are not interested in going through all the details, then keep on reading the highlights we have mentioned below.
The benefits of PPP Loan Forgiveness can be received by both individuals and corporations. While, there is restriction or a cap on the maximum amount that can be redeemed, it mainly is dependent upon the scale of your business and the actual purpose of the loan amount.
Loan forgiveness applies for both the lenders and the borrowers. There is a time limit for both the parties to qualify under the Act and that window closes if the appropriate covering period is not selected.
The detailed outline is provided on most websites, but if you have any concerns, then it is best to consult an accountant as they can provide you much more clarity of the situation. There are privileges for payroll and nonpayroll expenses and depending upon the organisation type different sets of clauses might apply.
The Process involved
Before we discuss the application process you need to know a few eligibility criteria. First of all, to qualify your organisation needs to have less than 500 employees. Moreover, you need to provide solid evidence to show that your operations have been adversely affected by the pandemic.
Once you have gone over the prerequisites and are sure that you are eligible for the program, you can apply for the loan by going to the SBA website.
There is still around 100 billion dollars cash left in the program and the deadline for the application has been extended upto June 30th, 2020. The application itself is easy to understand and to the point. So, we don’t think you will have any kind of trouble while filling it or filing it.
How much money can be claimed?
There is no go to figure or answer to this question. The variables present under the scheme involve a lot of parameters and they are guaranteed to differ from one company to another.
Generally speaking, 60% of the payroll amount and 40% of the non payroll costs are forgiven. However, keep in mind that it won’t occur until the maturity of the loan period is up. Lastly, don’t forget to deal with lenders who are approved by SBA.
Currently, there are roughly around 1,800 entities and that number will only increase in the coming days. Always remember, SBA or any other legitimate authorities never ask for your sensitive information such as the social security number, credit card and pin numbers.
If you ever feel like you are dealing with unauthorised third parties, then raise a complaint at FTC at the earliest. After all, you can’t be too safe on the internet especially whenever money is involved.
2020 has been a disastrous year for many businesses financially. The blow to the economy has led to widespread chaos and it is not a problem which can be solved any time soon.
Nonetheless, the government is trying their best to get everyone back on their feet and PPP programs are the end result we have got for the time being. So, make the best use out of it.
Were you able to get the compensation from the government for the losses during the pandemic? What do you think about PPP Loan Fraud? Let us know your answers by commenting below.