New FAQs on the Paycheck Protection Program
13 May 2020
May 13, 2020 – The Small Business Administration issued a new FAQ regarding the Paycheck Protection Program this morning that eases borrower concerns about the certification of need issue.
The PPP requires borrowers to certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” On April 23, 2020, SBA issued an FAQ saying that a number of borrowers could not make that certification and that borrowers had to consider current business activities and other sources of liquidity when making that certification. They also said borrowers who paid back their loans by a May 7, 2020 deadline would be deemed to have made the certification (they later extended the deadline to May 14, 2020). This made a lot of borrowers nervous about whether SBA might pursue civil, or even criminal, actions against them if they didn’t repay the loans by the deadline.
Today SBA said that all borrowers who borrowed less than $2 million are deemed to have made the certification in good faith. This allows most borrowers to stop worrying about the certification issue.
SBA also said that if a borrower is deemed to have not made the certification in good faith, the borrower will be required to repay the loan and will not be eligible for loan forgiveness. If the borrower repays the loan, then SBA will not pursue civil or criminal actions against the borrower. This should help even large borrowers feel less worried about keeping the loans.
The information provided herein is intended as general information and is not to be construed as legal advice. If legal advice is needed, you should consult an attorney.
Eric R. Benson is a business law attorney with Ireland Stapleton Pryor & Pascoe. His practice focuses on advising businesses on legal matters throughout the life cycle of the business. He also advises nonprofit organizations regarding formation, qualification for tax exempt status, mergers and acquisitions, and general matters related to their operations. You can reach him at 303-628-3615 or firstname.lastname@example.org.