New PPP Guidance Clarifies Certifications and SBA Loan Review for Borrowers

The U.S. Treasury Department (“Treasury”) and Small Business Administration (“SBA”) clarified the Paycheck Protection Program’s good faith certification requirements and loan audit guidelines in a Frequently Asked Questions document issued Wednesday, May 13, 2020.

All PPP loan applicants are required to certify that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant” when applying for the program. On April 23, 2020, the Treasury and SBA released guidance that worried many borrowers and emphasized the importance of loan applicants’ business necessity for taking out the loan.

Question 46 in the newly-released guidance clarifies that all borrowers that received loans under $2 million will be “deemed to have made the required certification concerning the necessity of the loan request in good faith.”

Borrowers that received loans greater than $2 million should anticipate review by the SBA, as discussed in our previous post “New Considerations for Small Business PPP Borrowers.” The new guidance indicates that the SBA will determine whether these borrowers have “an adequate basis for making the required good-faith certification” that is examined against “their individual circumstances” and the guidance released by the Treasury and SBA.

Borrowers that are found to have lacked such an adequate basis will be notified by the SBA and will (1) be required to repay the outstanding loan balance and (2) not be eligible for loan forgiveness. If the borrower repays the amount following the SBA’s notification, no additional recourse or penalties will occur.

To access the full FAQ on the Treasury website, please click here.

Please contact your KDDK attorney or any member of the KDDK business law team for additional information and individualized guidance on the Paycheck Protection Program or any related matter.

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