Whispers of SBA COVID-19 fraud abound

In a dark bar, one guy whispers to another that outside a certain apartment building, there is a man with Small Business Administration (SBA) loan papers. All you have to do is make up a business and get $10,000.

Meanwhile, in an office, a man with a drug problem has a failing business and significantly misrepresents his business on SBA loan papers. Two years later, he is arrested and serves 14 months at a federal prison for wire fraud and money laundering.

The latter is the real case of Jeff Grant, a former lawyer, who told Entrepreneur magazine of his spiral into the kind of desperation that led to his arrest.

His first point is obvious: Don’t lie to the SBA and don’t think that the rules are suspended in times of emergency. Not true. Grant says that even state unemployment websites are giving written instructions on how to mislead the government loan apps. Don’t lie about your location. Don’t misuse the money.

In Grant’s case, his application was after the Sept. 11, 2001 attack on the World Trade Center. Thousands of people misrepresented their businesses on emergency loan applications, and they were prosecuted.

But in the case of current SBA loans, lots of restrictions apply, including such a thing as not moving your business. Beware that loans over $25,000 require a pledge of collateral. Don’t spend SBA money on personal debts such as credit cards. The funds are designed for business.