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By: Law Offices of Mace J. Yampolsky

What Is The Paycheck Protection Program (PPP)?

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The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a federal law enacted in or around March 2020 and designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses, through a program referred to as the Paycheck Protection21 Program (“PPP”).

In order to obtain a PPP loan, a qualifying business submitted a PPP loan application, which was signed by an authorized representative of the business. The PPP loan application required the business (through its authorized representative) to acknowledge the program rules and make certain affirmative certifications in order to be eligible to obtain the PPP loan.

In the PPP loan application, the small business administration (through its authorized representative) stated, among other things, its: (a) average monthly payroll expenses; and (b) number of employees. These figures are used to calculate the amount of money the small business is eligible to receive under the PPP .1 In addition, businesses applying for a PPP loan were required to provide documentation showing their payroll expenses.

A PPP loan application was processed by a participating lender, such as a financial institution. If a PPP loan application was approved, the participating lender funded the PPP loan using its own monies. While the lender issued the PPP loan, the Small Business Administration (“SBA”) provided a guarantee to the lender for the PPP loan. Data from the application, including information about the borrower, the total amount of the loan, and the listed number of employees, was transmitted by the lender to the SBA in the course of processing the loan.

PPP loan proceeds were required to be used by the business on certain permissible expenses-payroll costs, interest on mortgages, rent, and utilities. The PPP allowed the interest and principal on the PPP loan to be entirely forgiven if the business spends the loan proceeds on these expense items within a designated period of time and uses a certain percentage of the PPP loan proceeds on payroll expenses.


People committing fraud use a different EIN number for each of the applications, despite the fact that they all purport to be on behalf of the same entity. All of the EINs are associated with different entities, and four of the five EINs used were created on or around the time that the loan application was signed. As of August 28, 2020, the IRS had received no filed tax returns for the any of the EIN /TIN numbers associated with the business.