The Small Business Administration has now released guidance on who they intend to audit when it comes to companies that applied for the Paycheck Protection Program. As announced on April 28th, the agency stated they would personally audit all PPP loan borrowers who got more than $2 million through the program, but this doesn’t close off other loans from being evaluated.

Major companies like Shake Shack claimed headlines a few weeks ago for not just applying for the money but receiving it, snapping up the funds before many other business owners even had a chance to complete their application. For this reason, the SBA has left it open to audit all other loans as they deem appropriate.

On the application, each borrower must certify that the loan request is being made solely for the purposes of supporting ongoing business operations. The key here is whether or not the company has access to other lines of credit, equity in the market, or high market value- according to the SBA, those companies need not apply, even though some of them did when the PPP loans first came online.

As a result, good faith certifications must be made by all applicants, and the SBA reserves the right to ask for more information to support such a claim. Those companies that already took funds from the program when they didn’t really need the money received a “safe harbor” clause to pay it back by May 14th without facing further consequences.

As of now, the agency assumes that anyone requesting or getting under $2 million from the program has made their application in good faith. If the SBA discovers a company that took funds without needing it, the funds must be returned to the SBA and the borrower becomes ineligible for loan forgiveness. The borrower must pay back the loan promptly if the SBA determines the funds should not have been requested or else face administrative enforcement of the loan’s cancellation.

The average loan in Phase Two of the program was just over $72,000. Over $100 billion in funds through the PPP loan were still available on Tuesday of this week.

Have questions about starting your loan application or how to strategize the spending of this money from a tax perspective? Schedule a consultation today.