What to Do If You Receive an SBA Audit Letter for Your PPP Loan

Thanks for visiting Spodek Law Group. We’re a second-generation law firm managed by Todd Spodek, with over 40 years of combined experience handling federal criminal defense cases. If you’ve received an SBA audit letter about your PPP loan, you’re facing a process that can lead to serious federal criminal charges – and you need help from attorneys who understand how government prosecutors build these cases.

This article covers what an SBA audit letter means, what the government is looking for, and what actions you should take immediately. We’ve defended clients in federal fraud investigations involving government programs, and we understand the stakes when federal agencies start scrutinizing your business finances.

What the Audit Letter Actually Means

An SBA audit letter isn’t a courtesy reminder or a routine check-in. It’s the beginning of an investigation. The Small Business Administration, working with the Office of Inspector General, is reviewing whether you qualified for the loan and whether you used the funds properly. In 2025, the SBA is auditing all companies that received loans of $2 million or more, but smaller loans are getting scrutinized too – especially if your application triggered fraud detection systems.

The letter typically requests documentation. Payroll records, tax returns, bank statements, 1099 forms, business formation documents. They want to verify every number you put on that PPP application. And they’re not just checking math – they’re looking for inconsistencies that suggest fraud.

Here’s what most people miss: the SBA shares its findings with the FBI, DOJ, and IRS. An audit isn’t just about repaying the loan. If investigators find evidence of false statements, you’re facing potential wire fraud, bank fraud, and conspiracy charges. Those carry decades of federal prison time.

Don’t Respond Without Legal Representation

Your first instinct might be to respond quickly, maybe write a detailed explanation, show them you made an honest mistake if the numbers don’t quite match. Don’t. Anything you say to the SBA can become evidence in a criminal prosecution.

Let’s say your PPP application listed 12 employees, but your payroll records only show 8. You might explain that you counted contractors, or seasonal workers, or that you planned to hire more people. That explanation could be used against you as an admission that you knew the employee count was wrong when you submitted the application. Federal prosecutors call this “consciousness of guilt” evidence.

At Spodek Law Group, we handle the response. Our former federal prosecutors know exactly what investigators are looking for and how to present your documentation without creating new problems. We review everything before it goes to the SBA – because once you send documents or statements, you can’t take them back.

The Timeline You’re Working With

The audit letter usually gives you 30 days to respond. That’s not much time to organize years of financial records, figure out what’s relevant, and present it in a way that doesn’t expose you to criminal liability. Some people ask for extensions – which sometimes works, but also signals that you’re having trouble pulling together documentation.

We start working the day you call us. Not next week after we’ve had time to review the file. If the SBA gave you 30 days, we’re using all 30 days to build the strongest possible response.

What the SBA Is Actually Looking For

The SBA isn’t just verifying that you spent money on payroll. They’re cross-checking multiple data sources to find discrepancies.

They compare your PPP application to your tax returns – often going back several years. Did you report the same number of employees to the IRS that you claimed on your PPP application? Did your quarterly payroll tax filings match the payroll costs you listed?

Your bank statements get reviewed. Did the money actually go toward payroll, rent, and utilities? Or did it fund personal expenses, luxury purchases, or business costs that don’t qualify?

They check publicly available information too. If your PPP application said you had 25 employees but your company website says “small family team,” that’s a problem. Posted on social media about starting your business in 2020 but your PPP application claimed 2019 employees? That’s worse.

The Difference Between Civil and Criminal Exposure

An SBA audit can go two ways. Civil resolution means you repay some or all of the loan, maybe pay a penalty, and the matter ends there. Criminal referral means the case gets sent to federal prosecutors who decide whether to file charges.

The factors that determine which path you’re on aren’t always obvious. Small discrepancies – like being off by a few thousand dollars on payroll calculations – usually stay civil. But false statements about basic eligibility requirements typically trigger criminal referrals.

If you claimed your business existed before February 2020 but it actually started in March 2020, that’s a false statement about eligibility. If you listed employees who never worked for you, that’s fabricated payroll. If you created fake tax documents to support your application, that’s fraud – and that’s going to federal prosecutors.

We’ve handled both civil audits and criminal investigations. The strategy is completely different depending on which track you’re on, and our job is to keep you on the civil side if at all possible. Once prosecutors get involved, your options narrow considerably.

How We Handle SBA Audits

We represent clients in PPP fraud investigations across the country. Todd Spodek is a second-generation criminal defense attorney who grew up working in his father’s law firm and has handled hundreds of federal cases. You might recognize our work – we represented Anna Delvey in the Netflix series case, and we handled the Ghislaine Maxwell juror misconduct matter.

When you’re facing an SBA audit, we review your entire PPP application and loan documentation first. We identify potential problems before the SBA finds them. Then we gather supporting documentation – but we don’t just dump everything on their desk. We present a narrative that explains your business, your eligibility, and your use of funds without creating criminal exposure.

We’re available 24/7 because these matters don’t wait for business hours. Our goal isn’t just resolving the audit. It’s protecting you from criminal charges.

The Statute of Limitations Isn’t Helping You

Congress extended the statute of limitations for PPP fraud to 10 years. That means the government can investigate and prosecute these cases until 2033 or later. The SBA Office of Inspector General has explicitly stated that PPP investigations will continue for years, and they’re even investigating loans that have already been forgiven.

So ignoring an audit letter and hoping the issue goes away? That’s not a strategy. The SBA will refer your case to the Department of Justice for collection or prosecution, and then you’re dealing with federal prosecutors instead of SBA auditors.

If you’ve received an audit letter about your PPP loan, contact Spodek Law Group immediately. We’ve represented clients in high-stakes federal cases, and we know how to handle government investigations that threaten your freedom and your future. Don’t try to navigate this alone – the stakes are too high, and the consequences of mistakes are too severe.