On May 18, 2020, Allyson Baker was quoted in Law360 on the importance of good record-keeping for companies that are risking government audits by accepting money from the Paycheck Protection Program (PPP), a $660 billion loan program set up by the Coronavirus Aid, Relief and Economic Security (CARES) Act to help small businesses avoid layoffs during the coronavirus pandemic.
According to the article, reports of large, publicly traded companies receiving loans helped spur a range of guidance from the Small Business Administration (SBA) and the U.S. Department of the Treasury warning certain businesses away from the program and promising special reviews for all loans over $2 million. May 18 marked the end of a limited safe harbor established by the SBA for companies that may have improperly taken out loans through the PPP.
In the absence of a clearly defined standard for a business's need for a PPP loan, careful documentation can help prepare clients to face an audit or a prosecutor down the road, Baker said.
Companies should keep track of projections they made before deciding to take out a loan, such as expected revenue, other sources of available liquidity, and the likely extent of their payroll needs, said Baker. "All that analysis that gets done as part of the ordinary course of decision-making: you want to memorialize this," she said.
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