If You Suspect a PPP Loan Is Fraudulent, Here is How to Flag It

When the PPP (Paycheck Protection Program) was put into place, it was meant to provide funding to keep small businesses’ employees on payroll. The funds were expected to support small businesses through the COVID-19 crisis, especially in the spring of 2020 when so many businesses were forced to close temporarily.

The SBA (Small Business Administration) offered EIDL (Economic Injury Disaster Loans) and PPP loans to help individuals and businesses struggling due to the pandemic. However, as is typical of any program intended to help people, instances of fraudulent applications or uses of the funds have occurred.

What should you do if you know of or suspect someone is committing PPP fraud? Here are some guidelines for how to flag a PPP loan that you think might not fit the program’s requirements.

There are multiple reasons why a particular PPP loan could be red-flagged by the SBA. Here are some common circumstances that could cause a flag on a loan application:

• The company has applied for multiple PPP loans from different lenders
• Making a false statement on a PPP loan application
• Submitting an incomplete PPP loan application
• Using PPP loan funds for unapproved expenses
• Submitting false certification to receive PPP loan forgiveness

Federal prosecutors and criminal investigators are “actively looking for possible PPP loan fraud and other CARES Act violations” according to the firm Pate, Johnson & Church.

Reuters reported in October 2020 that $4 billion worth of PPP loans had already been red-flagged.

The SBA states that individuals can contact the OIG (Office of the Inspector General) at 800-767-0385. The number can be used to report fraud, waste, mismanagement, or misconduct involving SBA programs or employees. You can also flag a PPP loan application using the website.

According to the SBA, you're allowed to remain anonymous when reporting suspected PPP fraud or other inappropriate use of SBA programs. However, the organization notes that staying anonymous might prevent it from fully investigating the complaint and means that you wouldn't receive any updates about the status of the complaint.

Instead of remaining entirely anonymous, you can disclose your identity to the SBA but request that it keeps your identity confidential in official proceedings.

One source of fraud is when someone uses a false identity in order to file an application for PPP loans. If you suspect someone of using your personal identification information in a PPP loan application, you should act quickly to protect yourself and minimize damage.

First, be sure to contact the lender who issued the loan to report the PPP identity fraud.

Second, go to the FTC’s identity theft website to report the identity theft and follow the recommended steps for identity recovery.

Finally, once all of the necessary organizations have been notified, you must remain vigilant about monitoring your credit. Check all personal and business credit reports faithfully to keep an eye out for additional fraudulent occurrences.