As we have written about extensively, the CARES Act enacted in response to the coronavirus crisis established a Paycheck Protection Program (PPP) to provide forgivable loans to small businesses to sustain their payrolls. However, the loan can only be forgiven if certain conditions are met.
In mid-April, the PPP received public scrutiny after several large, and often public, corporations reported they had used the Program to take out loans. In response, and just days after the Paycheck Protection Program and Health Care Enhancement Act was signed into law, which provided an additional $310 billion for the PPP, United States Department of Treasury Secretary Steven Mnuchin spoke out.
On April 28, 2020, Secretary Mnuchin announced that any company taking out more than $2 million from the PPP would be audited by the SBA before loan forgiveness to ensure that borrowers who took needed it because of the coronavirus pandemic. Additionally, new guidelines were put in place on April 23, 2020, requiring potential borrowers and borrowers who have received funds to certify that the loan is “necessary,” which is discussed here.
Secretary Mnuchin added that “the program was designed for small businesses,” not for “public companies with liquidity,” and companies could face “criminal” consequences for false certifications or statements within their application.