PPP Loan Under $2 Million Deemed to be Good Faith

Posted May 13, 2020

On May 13, 2020, the SBA updated their Frequently Asked Questions (FAQ) document (click here) to include FAQ 46 in response to Paycheck Protection Program (PPP) loan applicants concerns about the requirements for good-faith certification concerning the necessity of their PPP loan request.

SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue:

“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.”

SBA is attempting to promote economic certainty for the smaller PPP borrowers with more limited resources, as well as focus their audit resources on larger PPP loans.  Borrowers with PPP loans over $2 million do not meet the safe harbor standard, but may still have an adequate basis for making the required good-faith certification, based on their individual circumstances.  These PPP loans will be reviewed by the SBA and borrowers will be required to provide sufficient support and documentation.

The SBA seems to be backing off of seeking criminal charges, even for these larger borrowers. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness.  If the borrower repays the loan after receiving notification from SBA, 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. In FAQ 47, the SBA has further extended the repayment date for borrowers to be deemed to have made the required certification in good faith to May 18, 2020, to give borrowers an opportunity to review and consider FAQ 46.

Please contact us with questions or to discuss your situation.