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What Should I Do if the SBA Contacts Me About My PPP Loan?
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What Should I Do if the SBA Contacts Me About My PPP Loan?
So the Small Business Administration (SBA) reached out to you about your Paycheck Protection Program (PPP) loan. That phone call or letter likely made your stomach drop. Try not to panic. The SBA contacts borrowers for a bunch of reasons, not all bad. Let’s walk through what it might mean and what you should do next.
Why Would the SBA Contact Me?
The SBA oversees all PPP loans, so they monitor borrowers to ensure compliance with the program rules. Here’s why they might be knocking:
Requesting More Documents
All PPP loans over $2 million get reviewed by the SBA. They double check you qualified, used funds correctly, and provided accurate info. Even under $2 mil you might hear from them requesting more documents to verify stuff. Annoying but standard.
Reporting Issues
Lenders have to send reports on all PPP loans to SBA. If anything looks off or they’re missing reports, you’ll get a request to sort it out. Could just be a data entry flub.
Suspected Noncompliance
If SBA flags possible noncompliance on your part, like:
- Not spending 60% on payroll
- Using funds for unallowed purposes
- Not meeting other eligibility criteria
They’ll definitely reach out to investigate. Don’t panic yet, could just need clarification.
Loan Forgiveness Review
After you apply for PPP loan forgiveness, SBA reviews your app and figures out the forgiveable amount. Expect contact from them with follow up questions on your calculations or expenses.
What Do I Do If the SBA Contacts Me?
Take a breath. The SBA just wants info to verify you used PPP funds properly. How you respond can affect the outcome though. Here are some tips:
1. Gather Your Documents
Pull together anything related to your PPP loan – your application, promissory note, bank statements showing use of proceeds, payroll records, lease agreements, retirement plan documents, tax filings etc. Better to have docs and not need them than scramble later!
2. Review The Rules
Re-read PPP loan program rules so you understand compliance requirements around use of proceeds, payroll spending, FTEs, etc. Make sure you’ve adhered and can speak intelligently if questioned.
3. Respond Quickly
Don’t let SBA requests languish! Respond promptly with requested info. Delay looks bad and reduces time to address any issues.
4. Be Transparent
This one’s huge. Total transparency with SBA builds trust. Explain your situation. Share any mitigating circumstances if you didn’t fully comply. Disclose everything upfront – trying to hide noncompliance only hurts you if discovered later.
5. Get Representation If Needed
If SBA is questioning your eligibility or use of funds or you suspect enforcement action, get legal counsel ASAP. PPP lawyers know the rules cold and can negotiate on your behalf if needed.
What If I Didn’t Comply with PPP Rules?
Mistakes happen. Many borrowers struggled spending 60% on payroll during COVID or had other compliance issues. If you didn’t comply, here are some options:
Apply for Exemptions
SBA exemptions allow forgiveness if you:
- Couldn’t rehire similarly qualified employees
- Couldn’t return to same level business activity
Talk to legal counsel on claiming exemptions. Evidence is required.
Appeal SBA Determinations
If SBA denies your loan forgiveness application or determines you are ineligible, you can appeal within 30 days. Appeals go before SBA Hearing Officers who reassess decisions. Over a third of appeals succeed so it’s worth trying!
Repay Some or All of the Loan
If exemptions or appeals don’t work out, you’ll have to repay non-forgiven amounts:
- 2 year term if disbursed before June 5, 2020
- 5 year term if disbursed after June 5, 2020
The 1% interest still applies. You can begin repayments once your forgiveness amount is determined.
Key Takeaways
An SBA inquiry feels scary but staying calm and responding appropriately helps. Remember:
- SBA oversees all PPP loans and contacts borrowers routinely to verify info and compliance
- Gather documentation related to your loan and review program rules
- Respond to SBA quickly and transparently. Disclose any issues.
- Seek legal counsel if questioned on eligibility or use of funds
- If necessary, apply for exemptions, appeal determinations, or repay non-forgiven amounts
With the right preparation and guidance, you can get through an SBA review just fine. Help is out there – including from lawyers if needed – so don’t panic!
Resources
PPP Loan Program RulesPPP Loan Forgiveness ApplicationSBA PPP Loan Forgiveness Appeals