The rules became so lenient that anyone who received $150,000 or less - which accounts for more than 90% of all borrowers - could get the full loan amount forgiven just by promising they had used the money correctly. That recommendation proved wise, because Congress weakened PPP forgiveness criteria over time.įor example, the Paycheck Protection Program Flexibility Act, signed into law by President Trump in June 2020, gave some borrowers full forgiveness even if they didn't fully restore their workforce: A company could offer a laid-off employee a job, and even if the employee turned it down, the company was still credited with maintaining worker head count. "But you do have it as a safety net available to you in case your business does take a massive hit." "Then, if you don't need the money, you can always just pay back the loan," Lichatin explained. Some banking professionals, including Lichatin, advised their customers to accept the funding, put it in a separate account, and wait to use it until the rules became more clear. That confusion posed a dilemma for many companies: Should they take the money if they might have to pay it back? continue to emerge at a brisk pace, often updating previous guidance." One consulting firm issued a client advisory with the headline "Fast and furious: The rules for the PPP. At one point, the SBA published a list of frequently asked questions on loan forgiveness that was 11 pages long. but a lot of the details were very unclear to businesses and banks."Īs the program evolved, its rules became increasingly complicated, and even experts struggled to make sense of them. "The SBA really rushed to get this program out there, which I think they should be commended for. "It was entirely unclear at the beginning," said Eric Lichatin, a commercial loan officer at Centreville Bank in Rhode Island, which was inundated by calls from customers wanting PPP loans. But what it would take later to qualify for forgiveness was hazy. In the frenzied early days of COVID, as PPP was created in great haste to keep businesses from potentially collapsing, the loans were simple to get: Companies simply had to pledge that the economic threat of the pandemic made the funding necessary. Their responses involved copious finger-pointing, blame-shifting and buck-passing, making accountability elusive.ĭuring the COVID shutdowns in March 2020, an employee visits a closed Converse shoe store in Phoenix. We spoke with numerous bankers, economists and government officials under former President Donald Trump and President Biden - since the program spanned both administrations - to find out why loan forgiveness was so lenient, especially after the highly publicized misuse of the program. NPR dissected the decision-making behind the Paycheck Protection Program that led to it being widely seen as a massive government giveaway. An unknown additional number of loans went to companies that didn't need PPP funding to survive the pandemic.Īnd although the Justice Department and other federal agencies have up to 10 years to prosecute pandemic fraud, the SBA's inspector general has called that pursuit a "pay-and-chase" situation unlikely to recover much money. The SBA disputes those findings, but its own inspector general has estimated that at least 70,000 loans are potentially fraudulent. "The PPP program seems to have resulted in billions of dollars of fraudulent loans that have ultimately turned into grants," said Samuel Kruger, an assistant professor of finance at the University of Texas at Austin who co-authored a paper estimating that $64 billion of the nearly $800 billion in loans issued show signs of fraud, such as suspiciously high payrolls and multiple businesses listed at the same home address. Investigations Virtually all PPP loans have been forgiven with limited scrutiny
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