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Can You Go To Jail for SBA Loan Fraud?

During these unprecedented times, there are many households and businesses facing economic peril. Small businesses make up 44% of the economy’s movement and contribute to at least 60% of employment, which is why pandemic relief is viewed as a top priority in the wake of this great recession. According to the Small Business Administration (SBA), an upward of 

$2 million dollars in emergency funding was allocated to small businesses with a minor interest rate of only 3%. As a result of the pandemic, small businesses are some of the most afflicted groups. When applying for a small business loan it is important to take certain things into consideration before applying. Of these considerable matters, a major one is an intent behind the loan. SBA loans are intended to provide relief or aid in business expansion for employers and employees alike. Any ill-will or abuse of a federal loan aside from its granted purpose may result in an audit. This potentially causes a world of trouble for individuals inappropriately misusing their funds.  

What is Loan Fraud?

Loan fraud is defined as making false statements on a federal application. Business owners lying about needs for assets and assistance in any form are committing loan fraud, which may result in dire criminal penalties. This is a federal crime, and the offender faces federal prison and extortionate fines. Whether intentional or not, it is imperative to keep a record of personal documents in terms of loan use and disbursement. Whether intentional or not, if a business is audited and these documents are not up-to-date or they do not correspond with the original purpose of the loan, the owner can be charged with various crimes such as money laundering, financing of terrorism, and even conspiracy. 

Things to Take Into Consideration Before Accepting Loan or Relief Money 

The government passed the Cares Act intended to alleviate individuals from economic difficulties as a result of the pandemic. For small businesses, two types of loans were created through the SBA which includes the PPP (Paycheck Protection Program) and the EIDLP (Economic Injury Disaster Loan Program). The first thing to consider before agreeing to any SBA federal or institutional loan relief is the reason for the loan. Many business owners accept loans blindly in good faith, hoping that everything will work out because they now have the funds to organize their business accordingly. 

A lack of a solid plan for utilizing funds or estimation of repayment counts as a recipe for disaster. Small business owners fall victim to their loans more often than not resulting in default. Another facet to consider is the terms of the lease. What is the interest rate? When do the first monthly payments begin? According to SBA debt relief, small businesses with deferred loans will begin making six monthly payments after the deferment period ends. Looking into these terms, or going over it with a criminal defense lawyer will discourage any suspicion of SBA loan fraud and prevent an audit that may cause a business owner to face federal charges. 

How to Protect Yourself From Loan Fraud

One strategy to avoid an SBA loan audit is by getting organized with all the necessary business documents. Everything from payroll to expense receipts and copies of signatures is all essential items. Although audits are not ensured, additional paperwork may be required. Having everything secured in a safe area or an online security folder will prevent any discrepancies in your loan application. Another option to deflect a potential audit is through entering audit protection. Certain loan programs offer audit protection. These programs act as a crutch for individuals with red flags in their paperwork. If that business still faces SBA loan fraud accusations, a criminal defense attorney in San Diego can assist with the legal investigation. 

What to do if you are accused of SBA Loan Fraud

SBA loan fraud is a serious issue. Offenders facing criminal charges for loan fraud could face up to 30 years in federal prison depending on the severity of the charge. While times are tough, it is important to weigh the reasons why the loan is necessary and if there are other methods to procure the needed funds. Using a loan for personal gain or anything else outside its intended purpose such as keeping a business afloat, paying employees, updating inventory, and more may result in a federal investigation and criminal penalties. 

If you or anyone you know is facing SBA loan fraud charges, it may be in your best interest to speak to a criminal defense lawyer. Our law office of Vikas Bajaj in San Diego has over 19 years of experience defending federal cases such as SBA, PPP, and EIDLP loan fraud. With our skilled and knowledgeable attorneys, you can rest assured knowing your case is in good hands. Contact our office today for a free consultation to hear what rights you may be entitled to. 

Category:

Fraud & Embezzelment