PPP - Good Faith Certifications
In recent weeks, Treasury and the SBA have been requesting that companies receiving funds under the Paycheck Protection Program (PPP) review their certification that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Treasury then gave borrowers until May 14, 2020 to return funds, if they believe that the certification was not made in “good faith”.
Earlier today, the SBA and Treasury updated their FAQs to explain how they would review this certification. Under question 46, Treasury 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 provides some certainty for borrowers receiving funds of less than $2 million.
For companies with loans over $2 million, Treasury states that they “may still have adequate basis for making the required good-faith certification”. They go on to state, that they will review these applications to determine if they believe the good faith certification was met. In the case that they determine the loan is not eligible for loan forgiveness, they will inform the lender. If the borrower pays back the loan the “SBA will not pursue administrative enforcement or referrals to other agencies”. Additionally, for the lenders the determination “will not affect SBA’s loan guarantee.”
This guidance provides some certainty and comfort to many taking the PPP loans. While there are still questions for larger PPP applicants based on the vagueness of “uncertainty”, this guidance at least provides assurance to smaller companies. You can find the full FAQ’s on the US Department of the Treasury’s website by clicking here.
Important to Note: Treasury issued a significant amount of new information on Wednesday, May 13th. In addition to updating their FAQs over the Paycheck Protection Program (PPP), they also issued a new Interim Final Rule dealing with potential Loan increases. Read more here.