New York Attorney General Letitia James recently announced actions her office says is “to protect and support small businesses that have been impacted by coronavirus disease 2019 (COVID-19) and are in need of financial aid.”

James issued guidance to help small businesses obtain loans through the federal government’s Paycheck Protection Program (PPP) and also provided warnings and tips to protect small businesses from lenders and agents fraudulently and deceptively marketing these loans.

PPP loans are forgivable, low-interest, no-collateral loans guaranteed by the U.S. Government as a response to the COVID-19 pandemic. PPP lenders and agents are not permitted to charge borrowers fees, and the interest rates for all PPP loans are set at 1%. PPP loans are available to small businesses and non-profit and religious organizations with 500 or fewer employees (with some exceptions) and to sole proprietorships, independent contractors, and self-employed persons. The loans are administered by eligible lenders under the authority of the U.S. Small Business Administration (SBA).

Attorney General James’ guidance for small businesses to apply for PPP loans included the following:

Deal only with known, trusted lenders that are eligible to issue PPP loans. Visit the Small Businesses Administration’s website to find a full list of eligible vendors.

Make sure that the information in your loan application is correct. Unscrupulous agents or lenders may encourage borrowers to put false information in their loan applications to get the biggest loan possible, which would maximize lender fees. Incorrect information in an application can result in criminal liability for the borrower.

Borrowers should not pay fees to get a PPP loan. Lenders are paid fees for PPP loans only by the SBA, not by borrowers. If the borrower is working with an agent, the agent’s fees are paid by the lender.

Borrowers should not pay more than 1% annual interest for a PPP loan.

If a small business borrower believes it has been defrauded by someone offering, issuing, or servicing a PPP loan, or if it has been offered a PPP loan by a lender that does not appear on the SBA’s website as an eligible lender, it may file a complaint with the Attorney General’s Office of Consumer Frauds and Protection or call 1-800-771-7755.

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