Paycheck Protection Program Good Faith Certification
May 15, 2020
Recently, the Small Business Administration (SBA) and Treasury Department suggested that companies receiving funds under the Paycheck Protection Program (PPP) consider their certification of need for the funds, and subsequently gave borrowers until May 14th, 2020 to return the funds if they determine the certification was not made in good faith. On May 13th, 2020, the SBA and Treasury updated their FAQs to indicate how they would assess the applicant’s good faith certification, and to extend the deadline for repayment to May 18, 2020.
As part of the application for PPP loans, organizations requesting a loan under the program were required to certify that the “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant. Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficiently to support their ongoing operations in a manner that is not significantly detrimental to the business”. However, specific guidance was not issued by the SBA regarding how it would measure their ability to access other sources of liquidity.
The FAQs have been updated to add question 46 to explain that “Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith”. This is welcome news to those receiving PPP loans of less than $2 million that were concerned over their eligibility to receive the loan.
For organizations with PPP loans over $2 million, the SBA clarified that they “may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance.” The SBA noted that they will review these applications to determine if the good-faith certification was met, and it not, they will seek repayment and inform the lender that the borrower is not eligible for loan forgiveness. However, if the loan is repaid, the SBA “will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning
necessity of the loan request.”
Under FAQ #47, the SBA extended the repayment date for repaying the loan without violating the required certification concerning the necessity of the loan request in good faith to May 18, 2020 to give borrowers an opportunity to review and consider FAQ #46.
Contact the professionals at Gilliam Bell Moser if you have any questions.