Millions of small businesses sought and received funds pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) under the Paycheck Protection Program (PPP) administered by Small Business Administration (SBA) approved lenders at the outset of the COVID-19 pandemic. The SBA provided these funds in the form of loans, but also provided a roadmap for eligible applicants to obtain loan forgiveness—including guidelines pursuant to which all or portions of the loans can be transformed into grants. In order to qualify for the program, applicant businesses were required to make a number of certifications regarding compliance with a relatively complex set of eligibility criteria, including certifications as to the necessity of receiving PPP funds and the size of their business. Now, as the dust begins to settle, businesses that received PPP funds face the risk of an SBA challenge to their eligibility to retain the PPP funds without a repayment obligation.

The SBA has a six-year window in which to review (and potentially challenge) the accuracy of an applicant’s certifications—a window which survives both the SBA’s approval of the PPP loan and forgiveness of the loan repayment obligation. In response to the risk of SBA review, the insurance markets have recently introduced a novel insurance solution: PPP insurance. To prepare this introductory column on PPP insurance, we collaborated with our colleagues at HUB International, the fifth largest insurance broker globally. A significant portion of HUB’s client base participated in the PPP program and, in the short period that PPP insurance has been in existence, HUB has counseled numerous clients regarding PPP insurance.

Eligibility Criteria and Risks

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