Update on PPP Good Faith Certifications

May 13, 2020

Earlier today, the U.S. Small Business Administration (SBA) and U.S. Department of Treasury updated their FAQ document to address how good-faith certifications of companies receiving funds under the Paycheck Protection Program (PPP) will be reviewed. As a reminder, this is the certification made at time of application that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” As we previously communicated, borrowers have until May 14, 2020 to return their funds if they have since determined that their PPP loan was not necessary to support ongoing operations.

The clarification on good-faith certifications issued today may provide some certainty and comfort to many taking PPP loans.

For Borrowers Receiving PPP Funds of LESS Than $2 Million

The revised FAQ (question 46) states 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 safe harbor clarification is good news for those that received the PPP loans to help maintain their business operations.

For Borrowers Receiving PPP Funds of MORE Than $2 Million

For borrowers receiving loans of over $2 million, the FAQ states that they “may still have adequate basis for making the required good-faith certification.” Treasury goes on to state that these applications will be reviewed to determine if good faith certification was met. In the case that it is determined that the loan is not eligible for forgiveness, the lender will be informed. If the borrower pays back the loan the “SBA will not pursue administrative enforcement or referrals to other agencies.” Additionally, for the lenders, the determinations “will not affect SBA’s loan guarantee.” This provision eliminates the need to pay back the funds by May 14 if, in fact, there is a question as to whether there is adequate basis for the necessity of the loan.

Where to Find More Information

You can access the full FAQ document provided by the SBA and Department of Treasury by clicking here. Note that question 46 specifically addresses SBA’s review approach for good-faith certifications.

For additional information and guidance related to COVID-19 relief provisions, please click here. Should you have any questions, please contact your HBE advisor.

This communication and any applicable contents pertaining to COVID-19 employer relief provisions is based on our professional judgment given the facts provided to us and the COVID-19 employer relief provisions guidance as of the date of the communication. Subsequent developments changing the facts provided to us, or differences in the final guidance and regulations once they are issued, may affect the advice provided. These effects may be material.