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What to Know about PPP Loan Forgiveness and Fraud

  • Compliance
  • Article
  • 6 min. Read
  • Last Updated: 07/07/2021

employer working on their ppp forgiveness and learning to avoid ppp fraud

Table of Contents

Although the Small Business Administration (SBA) stopped accepting Paycheck Protection Program (PPP) loan applications in early May 2021 from most lenders, many businesses are now looking toward the process of applying for loan forgiveness. With multiple regulations resulting in different deadlines and obligations, this can quickly become a complex process for business owners. Recipients of a PPP loan will have payments deferred for 10 months after the end of the covered period, which could be anytime between 8 and 24 weeks. As you work through the application, ensure that you're making the most of the loan while still abiding by outlined requirements.

Only use a PPP loan for working capital

While the CARES Act outlines which expenses are eligible for loan forgiveness, there may be questions regarding eligible expenses if a business intends to pay back the loan amount. When applying for loan forgiveness, remember to check with your lender regarding how you can use your PPP funds and which expenses are eligible (what's permitted will vary among lenders). An expense may not be eligible for forgiveness, but it may still qualify as an eligible cost under the PPP.

The interplay between PPP loans and other federal programs

It's important to understand how a Paycheck Protection Program loan operates alongside other federal programs:

  • Employee retention tax credit (ERTC): The ERTC is a refundable credit that businesses can claim on qualified wages, including certain health insurance costs, paid to employees. Eligible businesses may use both an ERTC and PPP loan. The credit can only be taken on wages that are not forgiven or expected to be forgiven under PPP.
  • Economic injury disaster loan (EIDL): An EIDL could be used to pay fixed debts, payroll, accounts payable, and other bills that can't be paid due to COVID-19. While businesses can accept both a PPP loan and an EIDL, they can't cover payroll expenses with both loans. In this instance, the PPP loan would be used to cover these costs.
  • Restaurant Revitalization Fund (RRF): This program provided emergency assistance for eligible restaurants, bars, and other qualifying businesses impacted by the pandemic. While an eligible business could receive both a PPP loan and an RRF grant, the RRF grant amount could be reduced by the total amount of the PPP loan amount. An attempt to add $40 billion in aid to this fund through the Small Business COVID Relief Act of 2022 was voted down by the U.S. Senate on May 19, 2022 - essentially ending any further financial assistance for restaurants, bars, and food service businesses from the federal government.
  • Shuttered Venue Operators Grant (SVOG): This program provided eligible entities with grants equal to 45% of their gross earned revenue, with a maximum single grant of $10 million. A venue could apply for an SVOG if they also received a PPP loan. If the venue received a PPP loan after Dec. 27, 2020, the PPP loan amount will be deducted from the SVOG amount awarded.

Keep in mind that any state funding or assistance your business receives may also have an impact on your PPP loan. Check your state's website for more details, or use our interactive map to explore directives that may impact your business.

What is PPP fraud?

As with any program such as the PPP where money is at play, fraud and nefarious activity can happen. PPP loan fraud is defined as an individual or business providing false information when applying for or certifying a federal PPP loan. Not only is this a crime, but spending the funds outside of the specified uses is also illegal. As a reminder, eligible companies may use the money for the purposes of covering payroll and other operating expenses only.

Beware of PPP loan scams

Since the Paycheck Protection Program started in 2020, fraudsters have targeted small business owners with various schemes in an attempt to obtain personally identifiable information, banking and financial details, and other sensitive information. Scammers have become particularly savvy these days, and businesses can fall victim to fraud without realizing it.

According to the SBA, PPP fraud has most commonly taken form via:

  • Grants: The SBA only communicates from email addresses ending in Report fraud if you are being contacted about a grant by someone claiming to be from the SBA who is not using an official SBA email address.
  • Loans: Individuals who reach out guaranteeing approval of an SBA loan in return for up-front payment or a high-interest bridge loan should be flagged as suspicious activity and reported immediately.
  • Phishing: Phishing attacks may use the SBA logo in an attempt to obtain PII to install ransomware or malware on your computer or access personal banking information. Additionally, as with grants, other suspicious activity to be aware of is receiving emails from accounts claiming to be part of the SBA that don't end in or getting communication that mentions an application number that doesn't match the one you received when you applied.


Borrowers will need a great deal of information to complete an application for PPP loan forgiveness, and the process may be complicated. Paychex can help, and has developed a ;PPP Loan Forgiveness Estimator, including one specifically for its Paychex Flex® customers, which helps make the process simpler. While you work through your application, remember to be on the lookout for any suspicious activity, keep in mind eligible PPP loan expenses, and continue to stay up to date on COVID-19 information for businesses.


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* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.

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