Commercial Litigation Update

A recent analysis of data released by the United States Small Business Administration (“SBA”) suggests that the vast majority of Paycheck Protection Program (“PPP”) loans extended to small businesses during the COVID-19 pandemic have been forgiven. While positive, this news is cold comfort to PPP borrowers for whom forgiveness was denied, or, as we addressed previously, whose lenders required them to apply for forgiveness in amounts less than the full amount of their PPP loans. PPP borrowers can apply for forgiveness of their PPP loans any time up until the loan maturity date (2025 in many cases), and borrowers continue to receive denials of forgiveness for both first- and second-draw PPP loans. As a result, the PPP appeal process remains as important today as at its inception.

Given the volume of funds that were quickly dispersed during the COVID-19 pandemic, there were plenty of new areas for fraud and abuse. The Department of Justice (“DOJ”) initially set its sights on targeting the borrowers of such funds. Now, the DOJ is ramping up enforcement with the first ever False Claims Act (“FCA”) settlement with a lender of Paycheck Protection Programs (“PPP”) funds.

As we wrote recently, the Paycheck Protection Program (“PPP”) was critical in helping small businesses stay afloat amidst the COVID-19 pandemic and resultant government restrictions on commerce. By now, most borrowers know that a crucial step in ensuring that they retain the benefits Congress intended is to submit a PPP loan forgiveness application. Unfortunately, in the process of applying for forgiveness, some borrowers have encountered difficulties when their lenders disagree that they are entitled to apply for forgiveness in the full amount of their PPP loans. In 2021, the United States Small Business Administration (“SBA”) provided a partial solution to this problem by creating the PPP Direct Forgiveness Portal.