7 Ways to Avoid PPP Loan Fraud Penalties

Payroll Protection Program (PPP) loans act as an emergency fund for small businesses. It keeps operations liquid and it compensates employees while the profit is low. But not all borrowers are using the loan ethically.

Because of this, the DOJ became focused on investigating fraud. They're on the move to find borrowers who might be involved in PPP loan fraud. Every borrower is on their radar.

Those who are proven guilty of PPP loan fraud are subject to crippling penalties: prison sentences and hefty payments. No one wants to get penalized, especially if they've done nothing wrong.

If you're operating in Miami, you may be aware that the city has the highest number of fraud cases in the country.

Investigations related to fraud will most likely increase as well. Your best option is to hire a Miami PPP Fraud Lawyer .

If you think you're accused or charged with PPP loan fraud and you don't want to get penalized, contact an attorney right away. Work with Miami PPP Loan Fraud Firm for professional protection.

If you just received a PPP loan or if you're planning to apply for one, you need to act with immediate caution. Here are 7 ways to avoid PPP loan fraud penalties.

Be mindful during your PPP loan application

Some borrowers unintentionally committed fraud because they overlooked some important details during their application. They are also prone to the same penalties as those who did it on purpose because fraud is still fraud.

Are you planning to open an application for a PPP loan or for a second draw loan? Make sure you're being compliant with all the requirements needed.

The best way to make sure you're on track is to consistently communicate with your PPP lender. That way, you won't overlook small and important details many borrowers miss.

Continuously monitor your payroll expenses

Keeping track of your payroll expenses has its benefits. You can confidently face false accusations of fraud with confidence.

It becomes very easy for you to find your billingstatements, journals, and ledgers. You can get your documents right away to prove that you're not doing anything wrong.

Monitoring your payroll expenses is a great habit to keep your files in order. But more importantly, it keeps your business away from fraud accusations because you're always ready with your records.

Know the eligible payroll expenses for PPP

Be aware of the payroll expenses allowed for PPP loans . The best way to manage your payroll expenses is knowing what exactly to include there.

Make sure you're spending your funds on these eligible payroll expenses.

a)Compensation - This is the total cash and non-cash payments you provide to your employees.

b)Leave of absence - This is the time allowed for an employee to be away from work.

c)Separation pay and final pay - This is the compensation to an employee who is parting ways with the company.

d) Insurance premium - These cover healthcare, home, life, and vehicle insurances.

e) Retirement plan contributions - The retirement plan can be for 401(k) or 403(b).

f)Federal taxes - These contribute to the country’s growth and development.

g)State tax - These pay for your state’s government.

Apply the 60/40 rule

Your PPP funds should be distributed correctly to lessen the chances of getting charged. Allocate your PPP loan funds to eligible expenses. Use the 60/40 rule as your guide.

The PPP Flexibility Act requires borrowers to allot 60% in payroll expenses. While the remaining 40% goes to other eligible business expenses like rent, mortgage, and utilities.

You need to allocate your loan to the right amount of eligible expenses. This makes you sure that you won't be easily involved in false accusations.

Be aware of the charges involved in PPP fraud

It's a terrible idea to ignore the penalties associated with PPP loan fraud.

The most serious penalties are mostly tied to crimes like bank fraud, mail fraud, and wire fraud. These charges may give you penalties of up to 30 years in prison and up to a $1,000,000 fine.

You need to know that your time and money are at stake. Knowing that you have a lot to lose makes you more cautious and determined to avoid these penalties.

Know what makes a borrower accountable for PPP fraudIf you want to avoid penalties, it’s also important to know what makes a borrower accountable for PPP loan scams.

Here are some examples of actions that can get you accused and charged with PPP loan fraud. Make sure you avoid these red flags.

a)Changing the number of employees.

b)Misclassifying employees as independent contractors to qualify as a small business.

c)Hiding information during a PPP audit of fraud investigation.

d)Misclassifying certifications on PPP loan forgiveness application.

e)Lowering your standard payroll costs to receive a higher loan amount.

f)Failing to rehire employees after receiving PPP funds.

g)Cutting employee salaries despite having PPP funds.

h)Borrowing PPP funds from multiple lenders.

i)Using PPP funds for personal benefit.

Work with a PPP Loan Fraud Attorney

If you think you're accused or charged with PPP loan fraud and you don't want to get penalized, contact an attorney right away. Work with Miami PPP Loan Fraud Firm for professional protection.