Applications for business loans guaranteed by the federal government require a bank officer to verify the applicant’s information for accuracy. As noted on the U.S. FDIC website, a bank officer discovering or overlooking a falsified document may lead to a serious felony fraud charge.
As detailed by the SCORE Association, some important documents business owners must submit when applying for a loan include tax returns and financial statements. A bank officer may review a current Profit and Loss Statement, Balance Sheet and Income Statement before approving a business loan.
Submitting tax records with a business loan application
Loan applications generally require submitting both business and personal income tax returns from the past three years. New or start-up businesses, however, may usually apply with one year’s history of tax returns. The accuracy of a signed tax return could make a difference in whether a bank officer approves a loan or requests additional information.
Without a bank’s thorough due diligence, an inaccurate tax record may not receive sufficient attention. This may result in the bank’s failure to request the loan applicant to submit a corrected document.
Receiving loan proceeds based on inaccurate information
In some cases, a bank’s lax due diligence may result in suspicions of fraud that lead to federal officials beginning an investigation. In one such case reported by CBS Los Angeles, after several members of a California family allegedly submitted falsified business tax returns and payroll records, they received loan proceeds worth at least $18 million. According to federal officials, they purportedly used funds intended for disaster relief assistance to purchase luxury items and make down payments on three homes.
Funds obtained through false pretenses or used in contrast to a loan’s stated purpose may result in serious felony charges. A conviction may require a defendant to mount a strong defense to avoid severe punishment.