On July 6, 2020, the Small Business Administration (SBA) and Department of the Treasury released detailed Paycheck Protection Program (PPP) loan-level data to the public. This information includes loan amounts, borrower names, addresses, jobs supported and related information regarding PPP borrowers. The news media and borrowers have since identified errors in the reported information, including loan amount values.
Borrowers who review and correct their reported data for accuracy may avoid costly repercussions in the future. Undetected errors may cause reputational damage as well as financial risk. Key areas of focus are errors associated with loan amount and the calculation of the size of the borrower.
For example, as part of the public release of loan data, SBA issued a press release and guidance, “Paycheck Protection (PPP) Loan Data-Key Aspects.” This guidance reiterates that SBA will automatically review all loans with a loan value over $2 million, although SBA also separately provided that it can review any size loan at its discretion. Nonetheless, a loan amount incorrectly reported as exceeding $2 million may trigger an automatic government review or audit that might not have occurred otherwise. This will require the borrower to expend resources to support and respond.
A second example includes a borrower that qualifies for the PPP loan based on its NAICS code, but inaccurate reporting of the NAICS data causes the borrower to be deemed ineligible by the government due to incorrectly applied size requirements. Likewise, borrowers that qualified for a PPP loan based on exemptions to SBA affiliation rules could be deemed ineligible due to an inaccurately reported NAICS code, franchise identifier code or Small Business Investment Act financial assistance information.
In addition, inaccurate data may elicit unexpected negative reactions from the news media or the borrower’s customers. The accuracy of borrower data is also important because borrowers may anticipate that this data will be viewed and acted upon by additional governmental or other entities, as discussed in McGuireWoods’ previous alert, “CARES Act PPP Enforcement Escalates.”
To avoid consequences associated with undetected inaccuracies in the SBA data, business vigilance is recommended. A borrower that detects an error should document the basis for the mistake after carefully reviewing the loan and forgiveness applications it submitted. In addition, the borrower should provide appropriate written notice to its PPP lender as an important mitigating step.
