If you’re caught committing fraud on your PPP loan, you better get used to three hots and a cot — and not have your freedom for a long time.
“P3 funds can be used for four purposes: payroll, mortgage interest, rent/lease, and utilities. Payroll should be the primary use of the loan. The second stimulus bill also introduced four new allowable spending categories,” according to Bench.co.
You can view these categories here.
The key phrase to keep in mind is: “Payroll should be the primary use of the loan”. If you choose to spend your PPP money on, say, mortgage interest, it must meet certain parameters. For example, the Treasury Department says you can only use PPP loan money to pay mortgage interest incurred. before February 15, 2020. So if you’ve defaulted on your mortgage interest after On February 15, 2020, you cannot “catch up” using the PPP loan money.
Regardless of what you choose to do with your PPP loan, it’s a good idea to be as open as humanly possible.
“False statements or other fraudulent behavior related to a PPP loan can expose a violator to significant federal criminal liability in several ways,” reports the New York Law Journal. “False statements in a PPP application can also subject violators to up to 20 years in prison and a fine of $250,000 for wire fraud (18 USC §1343) and mail fraud (18 USC §1341), and up to 30 years imprisonment and a fine of $250,000 for bank fraud (18 USC §1344), among others, so it is crucial for small businesses and independent taxpayers to know and understand the many legal pitfalls potential during the application process.”