What Is the Penalty for Lying on a PPP Loan Application?
So your probably realizing that something on your PPP loan application wasn’t accurate—maybe you inflated your payroll costs, overstated your number of employees, or made other representations that don’t match your actual business records—and your trying to figure out what the consequences are if the government discovers these lies. The penalties for making false statements on a PPP loan application are severe and can include up to 30 years in federal prison, fines of up to $1 million, mandatory restitution of the full loan amount, and permanent federal felony convictions that will follow you for the rest of your life.
The specific charges you face depend on what lies you told and how prosecutors decide to frame your conduct, but the most common charges are making false statements to a financial institution under 18 U.S.C. § 1014 (30 years maximum), bank fraud under 18 U.S.C. § 1344 (30 years maximum), and wire fraud under 18 U.S.C. § 1343 (20 to 30 years maximum). If you lied on multiple parts of your application or if you submitted both a fraudulent loan application and a fraudulent forgiveness application, prosecutors can charge multiple counts with cumulative exposure exceeding 50 or even 100 years if all sentences run consecutively.
What makes PPP fraud particularly dangerous is that the lies don’t have to be sophisticated or involve huge amounts of money to trigger criminal prosecution. People are being charged and convicted for lying about having 10 employees when they actually had five, for overstating payroll costs by $50,000, and for certifying there business was in operation when it wasn’t. The Department of Justice has made clear that all fraud against pandemic relief programs will be prosecuted regardless of the amount involved, and federal judges in 2024-2025 are imposing prison sentences in virtually every case, not probation or alternatives to incarceration.
We represent clients accused of lying on PPP loan applications, and we know that the difference between errors or misunderstandings versus criminal fraud comes down to intent—whether you knowingly and intentionally made false statements to obtain money you weren’t entitled to, or whether you made good-faith mistakes based on confusion about program rules. Understanding what constitutes a criminal lie versus an innocent error, what the government must prove to convict you, and what defenses are available is critical to protecting your freedom and your future.
What Counts as Lying on a PPP Loan Application?
Understanding what the government considers “lying” on a PPP loan application is important because not every inaccuracy or error constitutes criminal fraud, but many representations that applicants thought were acceptable interpretations of ambiguous rules have resulted in federal prosecution. The key distinction is between false statements that are material to the loan decision and that you knew were false when you made them, versus innocent mistakes or reasonable interpretations of unclear program guidance.
Inflating your payroll costs is one of the most common lies that triggers prosecution. PPP loan amounts were calculated based on average monthly payroll costs from 2019 or early 2020, multiplied by 2.5. If you claimed average monthly payroll of $100,000 when your actual payroll was $60,000, you obtained an extra $100,000 in loan proceeds that you weren’t entitled to. Prosecutors view this as straightforward fraud because your records—payroll reports, tax filings, bank statements—show what you actually paid in wages, and claiming substantially higher amounts is obviously false.
Overstating your number of employees is another common lie that results in charges. If you claimed 20 employees on your PPP application but your IRS Form 941 quarterly payroll tax returns show only 8 employees during the relevant period, that discrepancy will be flagged by the SBA’s fraud detection systems. Prosecutors argue you deliberately lied about employee count to inflate your payroll costs and qualify for a larger loan. Even if you had legitimate reasons for the discrepancy—like counting part-time workers differently or including independent contractors—you’ll face significant investigative scrutiny and potential charges.
Certifying that your business was in operation on February 15, 2020 when it actually wasn’t is a lie that prosecutors take particularly seriously because it goes to fundamental eligibility for the program. The PPP required applicants to be in operation on that date and to have employees or paid contractors. If your business was formed after February 15, 2020, or if you had no revenue, no employees, and no business operations during that period, certifying otherwise is a false statement that makes your entire loan fraudulent from the start. We’ve seen numerous prosecutions involving businesses that existed only on paper or that were created specifically to obtain PPP loans.
Claiming you needed the loan due to economic uncertainty when you actually had substantial cash reserves, access to other financing, or no financial hardship is a lie that’s harder for prosecutors to prove but that can still result in charges, particularly for loans over $2 million. All PPP applicants were required to certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” If you had millions in the bank, no revenue decline, and no legitimate business need for emergency funds, that certification was false even if other aspects of your application were accurate.
Using fabricated documents to support your application—like fake tax returns, forged payroll records, or altered bank statements—is obvious fraud that results in additional charges beyond just false statements. In fact, 91% of prosecuted PPP fraud cases included allegations of creating, forging, or altering documents. When prosecutors can show you manufactured false documents rather than just misstating figures, it demonstrates criminal intent and makes your case much harder to defend because you can’t argue you made innocent errors or relied on bad advice.
What Does 18 U.S.C. § 1014 Cover?
Section 1014 is the primary federal statute prohibiting false statements to financial institutions, and it’s one of the most commonly charged offenses in PPP fraud cases because every PPP loan was made by a bank or financial institution even though the loans were backed by the SBA. This statute is powerful for prosecutors because it carries severe penalties—up to 30 years in prison and fines of up to $1 million—and because it applies to a wide range of false statements made in connection with loan applications.
The statute prohibits knowingly making any false statement or report, or willfully overvaluing any land, property, or security, for the purpose of influencing the action of various financial institutions including banks, the SBA, and other federally insured lenders. In PPP cases, violations typically involve false statements about payroll costs, employee counts, business operations, or use of loan proceeds that were made to influence the lender’s decision to approve the loan or the SBA’s decision to guarantee it.
To convict you under Section 1014, prosecutors must prove three elements beyond a reasonable doubt: (1) that you made a false statement or report to a financial institution or to the SBA, (2) that you did so knowingly, and (3) that the false statement was made for the purpose of influencing the institution’s action on a loan application. Each of these elements has important nuances that affect both the government’s ability to prove the charges and your ability to defend against them.
The “knowingly” requirement means you must have been aware that your statement was false when you made it. If you genuinely believed your payroll calculation was correct based on guidance from your accountant or based on your interpretation of SBA rules, you lack the knowledge required for conviction under Section 1014. This is where most defenses focus—showing that any inaccuracies in your application were the result of confusion, reliance on professional advice, or good-faith interpretation of ambiguous program requirements rather than intentional lies.
The “for the purpose of influencing” element requires proof that you made the false statement to affect the lender’s or SBA’s decision. In PPP cases, this element is almost always satisfied because the obvious purpose of providing payroll information, employee counts, and business details is to demonstrate eligibility for the loan and to calculate the loan amount. However, this element can be contested in cases where the false statement didn’t actually affect the outcome—for example, if you would have qualified for the same loan amount even with accurate information.
How Is Section 1014 Different from Bank Fraud or Wire Fraud?
Understanding the differences between Section 1014 false statements charges, bank fraud charges, and wire fraud charges is important because prosecutors often charge all three based on the same conduct, and each statute has different elements and slightly different maximum penalties. While there’s substantial overlap, the distinctions affect defense strategies and plea negotiations.
Section 1014 focuses specifically on false statements made to financial institutions or to agencies like the SBA in connection with loan applications. It doesn’t require proof of a scheme or artifice to defraud, and it doesn’t require use of wire communications—it simply prohibits knowingly making false statements for the purpose of influencing loan decisions. This makes Section 1014 charges easier for prosecutors to prove in some respects because they don’t have to establish a broader fraud scheme; they just have to prove you lied on your application.
Bank fraud under 18 U.S.C. § 1344 requires prosecutors to prove you knowingly executed or attempted to execute a scheme to defraud a financial institution or to obtain money from a financial institution by false pretenses. The key difference is the “scheme” element—bank fraud charges typically involve broader fraudulent conduct beyond just individual false statements, although in PPP cases, the scheme is usually straightforward: submitting a fraudulent application to obtain loan proceeds. Bank fraud carries the same 30-year maximum as Section 1014, but some defendants view bank fraud charges as more serious because they characterize the conduct as a deliberate scheme rather than just false statements.
Wire fraud under 18 U.S.C. § 1343 requires proof of a scheme to defraud AND use of interstate wire communications in furtherance of the scheme. Since PPP applications were submitted electronically, the wire element is easily satisfied. Wire fraud carries 20 years maximum, or 30 years when it affects financial institutions (which it does in PPP cases). Prosecutors charge wire fraud in addition to Section 1014 and bank fraud because they can charge multiple counts of wire fraud based on each electronic communication—every email, every online submission, every electronic fund transfer can be a separate wire fraud count.
In practice, prosecutors charge all three statutes in most PPP fraud cases because the same conduct satisfies all three, and charging multiple offenses gives them more leverage in plea negotiations and more ways to convict you if the case goes to trial. A typical indictment might include one count of bank fraud, three counts of wire fraud based on different electronic communications, and two counts of false statements under Section 1014 based on specific lies in your application. Each count carries its own penalty exposure, which is how cumulative exposure can reach 100+ years even though no one actually serves anything close to that amount.
Can You Be Charged Even If You Didn’t Get the Loan?
Yes, you can absolutely be charged with federal crimes for lying on a PPP loan application even if your application was denied, you withdrew it before approval, or the lender never funded the loan. The attempt to defraud the government is itself a crime under federal law, and prosecutors routinely charge defendants with attempted bank fraud, attempted wire fraud, and making false statements even when the fraud scheme failed or was detected before any money changed hands.
Section 1014 explicitly criminalizes making false statements “for the purpose of influencing” the action of financial institutions or the SBA, without requiring that the statements actually succeeded in influencing the decision or that you received any money. If you submitted a PPP application with inflated payroll figures intending to obtain a fraudulent loan, you’ve violated Section 1014 even if the lender denied your application or if the SBA flagged it for review and you never received any funds. The crime is in the making of the false statement with intent to influence the loan decision, not in actually obtaining money.
Similarly, bank fraud and wire fraud statutes criminalize attempts to commit fraud, not just completed frauds. If you submitted a fraudulent PPP application but your lender discovered discrepancies and denied the loan before funding it, prosecutors can charge attempted bank fraud and attempted wire fraud based on your fraudulent submission. While attempted offenses sometimes carry lower maximum penalties than completed offenses, in practice, the penalties for attempt are often the same, and judges consider the intended loss (what you tried to steal) rather than just actual loss when calculating sentences.
This principle that attempt is a crime means you can’t escape liability by voluntarily withdrawing your application after submitting it. If you submitted a fraudulent PPP application, realized you might get caught, and withdrew the application before approval, you’ve still committed the crime of making false statements and attempted fraud. The withdrawal might be viewed favorably at sentencing as evidence of remorse or abandonment of the scheme, but it doesn’t negate the criminal conduct that occurred when you submitted the false application.
The only scenario where submitting a false application might not result in criminal liability is if you catch and correct the error before the lender or SBA relies on it. For example, if you submitted an application with an error, immediately contacted your lender to correct it before they processed the application, and provided accurate information, prosecutors would have difficulty proving you intended to defraud anyone because you corrected the false statement before it could influence any decision. However, this requires prompt correction—waiting until you learn about an investigation and then trying to fix things is too late.
What If Someone Else Prepared Your Application?
If a loan preparer, accountant, consultant, or other third party prepared your PPP loan application and they’re the ones who made false statements or inflated figures without your knowledge, you may have defenses to criminal charges, but your not automatically off the hook just because someone else filled out the forms. Whether you’re criminally liable depends on what you knew about the false statements, whether you authorized or ratified them, and whether you benefited from the fraud.
The key issue is your knowledge and intent. If you provided accurate information to your accountant or loan preparer—your actual payroll figures, your real employee count, your genuine business expenses—and they inflated or altered those figures without your knowledge or authorization when preparing the application, you lack the criminal intent required for conviction under Section 1014, bank fraud, or wire fraud. The crime requires that you knowingly made false statements, and if someone else made them without your knowledge, you didn’t commit the offense.
However, prosecutors will scrutinize your claims that you didn’t know about the false statements, and they’ll use circumstantial evidence to argue you must have known. If the loan preparer gave you the completed application to review and sign, and the payroll figures listed were obviously inflated compared to what you actually pay your employees, prosecutors will argue you should have noticed the discrepancies and that signing the application ratified the false statements. If you received a PPP loan that was much larger than what you expected based on your actual payroll, prosecutors will question why you didn’t investigate or object.
Your relationship with the loan preparer also matters. If you hired a professional with no apparent reason to commit fraud, and they went rogue without your knowledge, that supports your defense. But if you hired someone who advertised on social media that they could “maximize” your PPP loan, or if you paid them a percentage of the loan amount as a fee, or if there were communications suggesting you wanted them to inflate figures, prosecutors will argue you were in on the scheme or at minimum that you were willfully blind to obvious red flags.
Even if your defense that someone else prepared the application is credible, you still might face civil liability and restitution obligations if you received money you weren’t entitled to. The government’s position is that even if you’re not criminally culpable, you need to return fraudulently obtained funds because you weren’t eligible for them. This means you could avoid prison but still face lawsuits, asset seizure, and repayment demands.
What Are the Sentencing Guidelines for Lying on PPP Applications?
Federal sentencing for lying on PPP loan applications is governed by the U.S. Sentencing Guidelines, specifically the fraud guideline under U.S.S.G. § 2B1.1, which calculates recommended sentencing ranges based primarily on the loss amount involved in the fraud. Understanding how these guidelines work is critical to evaluating plea offers and understanding your realistic sentencing exposure if you’re convicted.
The base offense level for fraud under the guidelines is 6 or 7, depending on the specific statute of conviction. From there, the guidelines add levels based on the amount of loss involved. Losses under $6,500 result in no enhancement, but losses increase the offense level on a sliding scale: $6,500 to $15,000 adds 2 levels, $15,000 to $40,000 adds 4 levels, $40,000 to $95,000 adds 6 levels, and the enhancements continue upward with losses over $550,000 adding 14 or more levels. Since many PPP loans involved six-figure amounts, loss enhancements typically add 10 to 16 levels or more to the base offense level.
Additional enhancements can significantly increase your offense level beyond just the loss amount. If your fraud involved 10 or more victims, add 2 levels (this can apply in PPP cases where multiple people’s identities were used or where the scheme affected numerous parties). If it involved sophisticated means—like creating fake documents, using multiple identities, or concealing the fraud through complex transactions—add 2 levels. If you abused a position of trust, add 2 levels. If you were an organizer or leader of a criminal activity involving five or more participants, add 2 to 4 levels. These enhancements stack, so a fraud case can easily accumulate 20+ levels of enhancements.
Conversely, acceptance of responsibility provides a 3-level reduction if you plead guilty and demonstrate genuine acceptance of responsibility for your conduct. This reduction typically translates to about a 25% reduction in your sentence, and it’s one of the most important benefits of pleading guilty rather than going to trial. If you provide substantial assistance to the government by cooperating in investigations of others, prosecutors can file a motion for downward departure that allows the judge to sentence you below the guideline range, potentially significantly below.
To illustrate how this works in practice: if you lied on your PPP application and obtained a $200,000 loan you weren’t entitled to, your base offense level might be 7, plus 12 levels for the loss amount ($150,000 to $550,000 range), plus 2 levels for sophisticated means if you created fake documents, for a total of 21. Minus 3 levels for acceptance of responsibility brings you to 18. An offense level of 18 with criminal history category I (no prior criminal record) results in a guideline range of 27 to 33 months in federal prison. That’s over two years in prison for a first-time offender who pleads guilty, and it illustrates why PPP fraud is taken so seriously by federal sentencing judges.
Can You Go to Prison for Honest Mistakes on Your Application?
No, honest mistakes or good-faith errors on your PPP loan application should not result in criminal prosecution or prison time because the federal criminal statutes require proof that you knowingly and intentionally made false statements, not just that your application contained inaccuracies. The distinction between criminal fraud and innocent mistakes is one of the most important issues in PPP fraud defense, and understanding how prosecutors evaluate intent is critical to your case.
The key element that separates criminal conduct from mistakes is knowledge and intent. Did you know the statements on your application were false when you made them? Did you intend to deceive the lender or SBA to obtain money you weren’t entitled to? If the answers are no—if you genuinely believed your application was accurate based on your understanding of program rules, guidance from advisors, or reasonable interpretations of ambiguous requirements—you lack the criminal intent required for conviction under Section 1014, bank fraud, or wire fraud.
Examples of potentially innocent mistakes include miscalculating your average monthly payroll because you used the wrong time period or included/excluded certain types of compensation based on misunderstanding SBA guidance; counting certain workers as employees when they should have been classified as independent contractors, or vice versa; including owner compensation in payroll calculations when you shouldn’t have, based on confusing guidance about self-employed individuals; or making errors in translating your actual business circumstances into the specific questions and certifications required by the PPP application forms.
However, prosecutors are skeptical of claims that errors were innocent mistakes rather than intentional lies, and they’ll use circumstantial evidence to prove you must have known your statements were false. If your stated payroll costs on your PPP application are double what you reported on tax returns filed months earlier, prosecutors will argue you obviously knew the PPP figures were inflated. If you claimed employees who never worked for you and whose names appear nowhere in your business records, prosecutors will argue there’s no innocent explanation. The more obvious and egregious the false statements, the harder it is to argue they were mistakes.
To successfully defend against charges by arguing mistakes rather than fraud, you need evidence supporting your good-faith belief that your application was accurate. This might include communications with your accountant showing you provided them with information and relied on their calculations; emails or notes showing you researched SBA guidance and tried to comply with rules; contemporaneous documentation showing the business circumstances that led to any discrepancies; or expert testimony explaining how reasonable people could have interpreted ambiguous program requirements differently. Without affirmative evidence of good faith, simply claiming “I made a mistake” after getting caught is rarely sufficient.
What Should You Do If You Lied on Your PPP Application?
If you realize that statements on your PPP loan application were false—whether intentionally or through errors that you now recognize—you need to make strategic decisions about whether to proactively address the issue, how to respond if you’re contacted by investigators, and whether to seek legal counsel before the government discovers the problems. The decisions you make now can determine whether you face criminal prosecution and what your exposure is if charges are filed.
First and most importantly, consult with an experienced federal criminal defense attorney before taking any action or making any communications with the SBA, your lender, or federal investigators. What you do and say in the immediate aftermath of discovering false statements can either help your case or destroy any chance of defending yourself. An attorney can conduct a confidential review of your situation, assess your exposure, and advise you on the approach whether that’s voluntary disclosure, returning the funds, or preparing for potential investigation.
DO NOT destroy, alter, or selectively discard documents related to your PPP loan. Even if you think certain records are incriminating and you want to get rid of them, destruction of evidence is a separate federal crime under 18 U.S.C. § 1519 that carries up to 20 years in prison and will absolutely result in prosecution if discovered. Moreover, destruction of evidence eliminates any possibility of arguing that false statements were innocent mistakes because destroying records demonstrates consciousness of guilt. Preserve everything and let your attorney review it confidentially under attorney-client privilege.
Consider whether voluntary disclosure and repayment make strategic sense in your situation. In some cases, proactively contacting the SBA or DOJ to disclose errors, return the fraudulently obtained funds, and cooperate with any investigation can result in declination of charges or significantly reduced exposure. This approach works when the false statements were relatively minor, when you can credibly claim they were errors rather than intentional fraud, when you discovered them yourself rather than after being contacted by investigators, and when you can make full repayment. Your attorney can help determine if voluntary disclosure is appropriate and can handle communications to protect your interests.
DO NOT make statements to federal investigators without your attorney present. If FBI agents, SBA investigators, or other federal officials contact you asking questions about your PPP loan, politely decline to answer and immediately contact an attorney. Anything you say can be used against you in prosecution, and making false statements to investigators—even if you’re trying to explain away problems—is itself a federal crime carrying five years in prison. You have a constitutional right to remain silent and to have an attorney present during questioning, and exercising those rights cannot be used as evidence of guilt.
Evaluate your defenses and your likelihood of successfully fighting charges if they’re filed. If you have strong evidence that false statements were innocent mistakes, that you relied on professional advice, that you would have qualified for most or all of the loan with accurate information, or that you used funds for legitimate business purposes, fighting charges might make more sense than accepting a plea offer. Conversely, if the evidence of intentional fraud is strong, negotiating the possible plea agreement might be your option. This evaluation requires experienced counsel who understands federal fraud prosecutions and sentencing.
How We Defend Against False Statement Charges
When you hire us to defend you against charges related to lying on your PPP loan application, we provide comprehensive legal representation designed to achieve the possible outcome whether that’s getting charges dismissed, winning at trial, or negotiating a favorable plea agreement that minimizes your prison time and protects your future. We’ve successfully defended numerous clients facing federal fraud charges, and we know how to challenge the government’s case and present your defenses effectively.
We start by conducting a thorough investigation of your PPP loan application, your business circumstances at the time you applied, and the government’s evidence. We examine whether statements the government claims were false were actually false or whether there were legitimate bases for the figures you used. We identify any reliance on professional advice, SBA guidance, or industry practices that support your good faith. We document the economic circumstances your business faced during the pandemic to show why you needed the loan. This confidential investigation allows us to understand the strengths and weaknesses of your case and develop an effective strategy.
We challenge the government’s proof of knowledge and intent by presenting evidence that you believed your application was accurate when you submitted it. We gather communications with accountants, loan preparers, or advisors showing you provided them with information and relied on their calculations. We research the SBA guidance that was available when you applied and show how reasonable people could have interpreted ambiguous requirements differently. We present testimony from you and others explaining the legitimate business reasons for any discrepancies. By creating reasonable doubt about whether you knowingly lied, we can defeat the criminal charges even if your application contained inaccuracies.
We negotiate with prosecutors to obtain the possible resolution of your case. In appropriate situations, we can negotiate pre-indictment agreements where you cooperate, make restitution, and avoid charges entirely. If charges have been filed, we negotiate plea agreements that dismiss the most serious counts, limit your sentencing exposure, and include favorable sentencing recommendations. We present mitigating evidence to prosecutors showing why your case warrants leniency—evidence of good faith, lack of personal benefit, use of funds for legitimate purposes, and compelling personal circumstances.
If your case goes to trial, we provide aggressive courtroom representation to fight for acquittal. We cross-examine government witnesses to expose weaknesses in their testimony and create doubt about whether you had fraudulent intent. We present expert witnesses who explain legitimate reasons for any calculation errors or ambiguities in your application. We put on evidence showing your business was real, your need for the loan was genuine, and you used funds appropriately. We deliver powerful opening statements and closing arguments that tell your story and show why the government hasn’t met its burden of proving knowing and intentional fraud beyond a reasonable doubt.
At sentencing, if conviction is unavoidable, we fight to minimize your prison time through comprehensive mitigation evidence and aggressive advocacy for below-guidelines sentences. We present detailed sentencing memoranda with character letters, evidence of your contributions to community and family, documentation of hardships you faced during the pandemic, and arguments for downward departures or variances based on factors the guidelines don’t adequately consider. Our goal is to keep you out of prison if possible, or to minimize your incarceration if prison is unavoidable.
If you lied on your PPP loan application or if you’re being accused of making false statements, you need experienced federal defense counsel immediately. The penalties are severe, the cases are complex, and the decisions you make now will affect the rest of your life. Contact us for a confidential consultation, and let us fight to protect your freedom and your future.