Have you recently received a loan as part of the Paycheck Protection Program? Your business could be at risk!
This exclusive product available through Colony West provides primary coverage for the Paycheck Protection Program Certification process. If your business is subject to an audit and the Small Business Administration (SBA) determines that your loan was granted despite not qualifying under the terms of the program, you will be asked to repay the loan in full with interest. This policy will pay for the appeal process and may cover settlement of the loan.
The Paycheck Protection Program came into effect as part of the first stimulus bill brought forth by the government in the midst of the coronavirus pandemic to give some financial relief to small businesses and incentivize them to keep employees on payroll during unprecedented hardship. The program has since then been extended and is still currently accepting new applications. The SBA (Small Business Administration) intends to forgive all loans as long as all the strict criteria are met.
Businesses have to meet certain requirements to qualify for the loan. If your business is eligible,you must use the funds according to the rules set by the SBA in order to qualify for loan forgiveness. The government has already issued several interim rules pertaining to the loan program. As with any government program, these rules are strict, intricate and sometimes downright confusing. Any misuse of the funds could result in forgiveness denial and/or investigation from the Department of Justice which could lead to hefty fines and treble damages in violation of the False Claims Act.
Borrowers are also subject to audits from the SBA at any time, no matter the size of the loan. The SBA wants to verify that:
• The borrower is indeed eligible for a PPP loan under the CARES Act, according to the rules set by the SBA at the time of the application.
• The loan amount was calculated correctly and that the funds were used in accordance with the CARES Act.
• The loan forgiveness amount claimed on the application is accurate.
It is possible to add extra coverage to the primary certification coverage to protect yourself against penalties and treble damages incurred in the event of the SBA denying the loan forgiveness application or an investigation from the Department of Justice.
You will need to provide the following information:
• Application for PPP loan and attachments
• Name of the prospective insured company, class of business, location, number of employees, affiliates, limits requested, explanation of how payroll calculations were performed
• General summary of how Covid-19 affected and is expected to continue to affect the client’s business
• Financial performance year-to-date
• Analysis of the affiliation rules (if applicable)
• Description of how need was assessed and working papers to support analysis (e.g., how did the borrower assess other sources of liquidity/funds; has there been a historical practice of capital infusions to aid the day-to-day operations)
Once submitted, our underwriters will review all the material and if they deem the risk initially
acceptable, they will submit a comprehensive quote with pricing, terms and conditions within 2-5