Paycheck Protection Program (PPP) Update: New Good-Faith Certification on the Need for SBA Loan

Repayment Deadline is Monday (May 18, 2020)


The US Department of Treasury updated its Frequently Asked Questions (FAQ) document, which provides guidance to address borrower and lender questions concerning the use of PPP loans granted by the Small Business Administration (SBA).

On May 13, 2020, US Treasury added question number 46 which stipulates how the SBA will review a borrower’s required good-faith certification on the necessity of their loan request to “support ongoing operations” and question number 47, extending the safe harbor repayment date to May 18, 2020, to give borrowers an opportunity to review the new guidance.

Any company, including its affiliates, that received PPP funds with an original amount of less than $2 million will be deemed to have made the required certification of the loan request in good faith without providing further evidence. This means that borrowers of less than $2 million should be safe from SBA review of their prior certification of economic necessity.   In making the calculation determining the amount of your loan, it is critical to ensure that the $2 million threshold includes all funds granted to affiliates through the program.

Borrowers with loans greater than $2 million (presumably including funds granted to affiliates) will be subject to review by the SBA to determine whether all required program criteria were satisfied (see our report on Calculating Paycheck Protection Program Loan Forgiveness). Following the review, if it is determined that the borrower lacked an acceptable basis for the certification, the SBA will seek repayment of the outstanding PPP loan balance and the loan will not be eligible for forgiveness.

If the borrower repays the loan after receiving notification from the SBA of the repayment requirement, the SBA will NOT pursue administrative enforcement or make referrals to other agencies.

This seems to suggest that if upon SBA review there is a determination that the borrower did not have an adequate basis for the economic uncertainty certification, the penalty will be loan repayment and denial of any forgiveness.  However, while administrative enforcement will not be pursued in such a case, there is the possibility that criminal enforcement could still be in the cards in the case where there is an allegation of fraud.

If you need help please email anyone on the Rooney Nimmo COVID-19 support team: Elannie DamianosAllan RooneyTim Davis, or Abbey Docherty or call us on 212 545 8022.


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