Requirements for Good Faith Certification Concerning Necessity of PPP Loan|
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On May 13, 2020, the Treasury released FAQ 46 regarding the SBA’s review of borrowers’ required good-faith certification concerning the necessity of the loan request.
The Treasury’s FAQ addresses both borrowers whose loan is less than $2 million and those whose loan is greater than $2 million.
Loans Less than $2 million
The Treasury stated, “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 statement removes the requirement for borrowers of less than $2 million to have to re-consider their certification of economic uncertainty based on the sources of liquidity available.
Loans Greater than $2 million
FAQ 46 does not provide clarification to borrowers with loans greater than $2 million of what must be considered as part of the certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”
As previously stated in FAQ 39 as issued on April 29, 2020, the SBA will review all loans in excess of $2 million and other loans as deemed appropriate. FAQ 46 clarifies the consequences of the SBA ultimately deeming the borrower ineligible. In the event the SBA determines the borrower “lacked an adequate basis for the required certification concerning the necessity of the loan request,” the loan will be required to be repaid and no forgiveness will be provided. In the event the borrower repays the loan, the SBA has stated that they “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.”
Let Aprio Help
We view this as very important in assessing risk in what the ultimate cost may be if the SBA determination is different than the company’s.
To discuss your documentation of economic uncertainty or how to interpret and document spending requirements for PPP forgiveness with an Aprio SBA loan expert, reach out today.
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Aprio’s goal is to provide the most up to date information, along with our insights and current understanding of these programs and regulations to help you navigate your business response to COVID-19.
The rules regarding SBA programs are constantly being refined and clarified by the SBA and other agencies In certain instances, the guidance being provided by the agencies and/or the financial institutions is in direct conflict with other competing guidance, regulations and/or existing laws.
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