When Do You Need PPP Loan Insurance?
Carl Niedbala
COO & Co-Founder
COO & Co-Founder
Over 4.4 million businesses accepted government aid through Payment Protection Program (PPP) loans to stay operational during the COVID-19 crisis. Now, the government will be conducting PPP audits for any business whose loan exceeded $2 million. The stipulations for receiving financial help were strict, making ongoing compliance a potentially massive challenge. Here’s what you need to know about PPP loan insurance and when this new insurance product can cut down on the risks you face.
The PPP’s ultimate goal is to help businesses keep employees on the payroll. During the two rounds of PPP loan allocation, government relief programs dedicated nearly $510 billion to keep small companies from shuttering. However, businesses that accepted the financial support must meet ongoing criteria or “necessity certification,” which the US Small Business Administration (SBA) determines as:
That said, these loans are forgivable — but only if the business meets specific criteria. According to the SBA, PPP loan details are:
Some businesses returned the PPP loan because of the confusing rules and execution. Others did their best to comply with the messy regulations about when and how to use the funds. Nevertheless, the government is going to check up on plenty of companies that accepted the PPP loan.
As mentioned, the government will be conducting audits for any business that’s loan was more than $2 million. Though, companies that fall under the $2 million mark don’t need to be as concerned. The government audits are trying to locate businesses that received a PPP loan but failed to comply with the stringent (and changing) eligibility requirements.
No doubt, you’ve heard outrageous stories of small business owners buying high-end boats or taking extravagant trips with their PPP loans. While some of these tales might be true, the real risk lies with companies bending the rules slightly, whether purposely or accidentally.
For example, the PPP rules changed from one round to the other. Some businesses are finding that they weren’t genuinely qualified to request PPP loan support. Perhaps some professionals miscalculated their financials, or they weren’t actually eligible for another reason entirely.
No matter why, the government won’t grant loan forgiveness to all businesses. Instead, these companies will face a slew of fines and damages. This uncertainty is where Founder Shield steps in to ease some of the anxiety surrounding the perplexing PPP loans.
Although PPP loan insurance is a novel product, it might become a timely help during an incredibly challenging time for many companies. For starters, it’s coverage for businesses the government determines wasn’t eligible for the PPP loan. Most companies in this predicament will have to repay the loan in its entirety, which might result in business closures — the very thing we are trying to avoid.
However, PPP loan insurance kicks in to help businesses who feel the government’s assessment of their eligibility, and subsequent loan forgiveness isn’t possible. This policy covers related losses, such as defense costs, fines, penalties, and financial damages.
Suppose your business is up for an audit, and the government is hacking away at your initial eligibility. In that case, it might be time to consider PPP loan insurance to guard against the associated risks. Some details regarding coverage are as follows:
Keep in mind that it’s not effortless to get a quote for this product. It’s a tall order that will call on the expertise of your finance team — but we’re here to help. For a deeper dive into PPP loan insurance, please know that we can help guide you through this trying time.
Understanding the details of what coverage your company needs can be a confusing process. Founder Shield specializes in knowing the risks your industry faces to make sure you have adequate protection. Feel free to reach out to us, and we’ll walk you through the process of finding the right policy for you.
Want to know more about PPP loan insurance? Talk to us! You can contact us at info@foundershield.com or create an account here to get started on a quote.
Most SME business sellers rely solely on D&O insurance, but that strategy still leaves them exposed. Our guest author from CFC outlines the risks and offers a better solution.
President Biden recently released an Executive Order on Crypto, ensuring responsible innovation in digital assets. Here’s the newsbeat.
ESG issues change rapidly, especially over the past few years. Let’s look at how these shifts influence risk management now and in the future.
2021 was a transitional year for the fintech industry. Here’s a look at insurance trends that surfaced and what to expect in 2022.
Risk retention groups provide affordable and customized solutions for groups facing similar liabilities. Will it work for you?
After a nerve wracking pandemic year, many tech companies anticipate going public. Here’s what to expect from IPOs in the future.