How To Make Sure Your Business Complies With PPP Loan Requirements


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Congress created the Paycheck Protection Program (PPP) in response to the mass business closures brought on by the coronavirus pandemic. Under the program, $349 billion in PPP loans were extended to small businesses to help employees affected by the crisis. Loan forgiveness is an option for many businesses, but the government wants to make sure borrowers are complying with regulations. For that reason, the government is creating a vast compliance team to check up on businesses. If your company borrowed PPP funds, you could be audited. You need the help of an experienced New York business law firm.

Borrowers have to certify that they need a PPP loan due to economic uncertainty brought on by the virus. There has been criticism that many of the borrowers have been larger companies who didn’t really need the money. That prompted the Small Business Administration (SBA) to issue a clarification regarding the loans. Funds are not intended for businesses with sufficient sources of liquidity to support their ongoing operations during the downturn.

A Safe Harbor that allowed borrowers to return money without penalty has expired. If you borrowed at least $2 million your company will be fully audited. Businesses that borrowed less will be subject to spot audits. Part of the purpose of these audits is to make sure borrowers actually needed the PPP loan. Contact a New York business law attorney if you need help with an audit.

The SBA recently announced the long awaited details of its loan forgiveness rules. They include:

The borrower submits a PPP Loan Forgiveness Application, plus supporting documentation. The paperwork includes records about employee compensation during the eligible time period.
The borrower must make a series of certifications regarding how the money was used. It’s important to understand these certifications plus the penalties for misusing PPP loans.
Part of the paperwork gathering should include payroll records to show employee hours worked and salaries earned. There are other expenses that PPP loans can cover, so document those as well.

There are cases in which the loan, or part of it, might not be forgiven. One example would be if the borrower cut its staff size or reduced the salaries of certain workers. The PPP loans were designed to ensure business continuity, so these and other changes could affect loan forgiveness eligibility. These rules are complicated, and you need someone who understands them. We have monitored the SBA’s loan forgiveness requirements and can let you know if your business qualifies.

It is not unusual for government loan programs like the PPP to come with strings attached. Among the issues that might cause legal problems for borrowers, or put their loan forgiveness at risk, are:

Misuse of the PPP funds (which are generally intended for payroll, rent, mortgage interest, and utilities)
Changes affecting employees such as layoffs, furloughs, staff size, and pay decreases
Failure to follow all required steps for loan forgiveness
Failure to document all eligible expenses for loan forgiveness
Complex and constantly changing rules and regulations affecting PPP loans


Rosenbaum & Taylor is keeping track of the SBA rules and regulations concerning PPP loans. Our law firm has experience with other legal issues impacting today’s New York businesses as well. You have a business to run. And doing so is difficult when you have to stay on top of the government’s complicated rules. Let us handle the legal side of things for your business. If you borrowed a PPP loan and have any questions about the program, we can help. Give us a call today to schedule a consultation.

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