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After the release of the Paycheck Protection Program from the Small Business Association (SBA), many questions are asked about the program regarding who was eligible for the forgivable loan and risk/ what kind of penalties might be included.
Shortly after came a new insurance policy for the program to ease fears, however some experts are wary of the policy.
HUB International, an insurance brokerage located in Chicago, is now offering PPP loan recipients a new insurance policy should the SBA decide they were not eligible for the program after all, the Kansas City Business Journal reports.
The policy was created in response to the obscure rules of PPP issues by the SBA and Treasury Department issued.
“Really, what the insurance is intended to help with is a company in good faith took a PPP loan, thought they were doing the right thing, but because the way the loan programs read doesn’t have 100% certainty and wants a little extra comfort,” Peter de Boisblanc said. De Boisblanc is vice president of transactional risk and U.S. practice leader at HUB International.
“If any point in the next six years, the SBA audits and they come to a different conclusion, there will be protection,” he said in the report by the Business Journal.
“To be clear, this insurance will not insure fraudsters or scammers,” de Boisblanc continued. “If you took the PPP loan in bad faith, you won’t be able to get a policy.”
Treasury Secretary Steven Mnuchin later suggested that companies that unfairly benefit or don’t follow the PPP’s lending terms “may be subject to criminal liability, which is a big deal.” In a May 8 letter, the House Committee on Oversight and Reform’s Select Subcommittee on the Coronavirus Crisis singled out five companies it said must return PPP loans.
The SBA has also since stated that all loans topping $2 million will be audited. Unless there is wrongdoing, the agency said, companies found ineligible would simply need to return the loan amount.
Given that roughly 24,000 businesses received more than $2 million in PPP funding, interest in the insurance product so far has been “tremendous,” de Boisblanc said. “If the government is hurting for money in a couple of years and we go into a recession, we could have more aggressive enforcement than currently contemplated,” he said.
