PPP Loans: An Update in Good Faith Certification | Wendel Rosen LLP
On May 13, 2020, the SBA released an update to its frequently asked questions [FAQ 46] regarding how it will review the good faith attestations of payroll protection program (P3) loans from borrowers.
The new FAQ states that borrowers who receive PPP loans in the amount of less than $ 2 million will be deemed to have made the required certification in good faith regarding the necessity of the loan application. New SBA Guidelines Extend Automatic Safe Harbor to Borrowers Receiving less over $ 2 million in PPP funds.
Borrowers who have received PPP loans over $ 2 million will be subject to review by the SBA to verify compliance with all PPP requirements, including economic need certification. Certification of economic need is based on the individual situation of the borrower “in light of the language of certification and SBA guidelines”.
If, during its review, the SBA determines that a borrower has failed the good faith certification (determining that the PPP loan was not a necessity), the SBA will notify the lender that the borrower does not. This is not eligible for loan cancellation and the borrower will have to repay the outstanding PPP loan.
Unfortunately, the new SBA guidelines do not provide guidance on what constitutes a ‘necessity’, ‘liquidity’ or when the use of that cash would be ‘significantly detrimental’, leaving those with one more PPP loan. $ 2 million without clear directions.