Written By Pamela Bethel, Esq.
On May 13th, 2020 the SBA released the updated PPP FAQ 46 guidance, as well as a new FAQ 47 guidance. The SBA originally provided a safe harbor deadline of May 7, 2020 for PPP applicants who lacked an adequate basis for the certification to return their loans. This deadline was extended to May 18th, 2020 by FAQ 47, and additional guidance on how SBA will review the certification was just released in FAQ 46.
On May 15th, the U.S. Treasury Department finally issued the PPP Loan Forgiveness Application and instructions. You can access this form HERE. In the final weeks of your business’ Covered Period, use the Form and Instructions as your guide to proper usage of your PPP loan.
FAQ 46 clarifies how the SBA will review borrowers’ economic necessity certifications. This guidance confirms that the SBA has created a safe harbor for PPP borrowers of less than $2 million.
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.
For largerPPP borrowers of $2 million or more, they will need to show that they had an “adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance.” If the SBA determines in the course of its review that a borrower lacked an adequate basis for its economic necessity certification, the SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness.
Importantly for larger PPP borrowers, the SBA will seek no relief beyond the repayment of the outstanding PPP loan balance without loan forgiveness.
If the borrower repays the loan after receipt of that notification, the SBA will not pursue administrative enforcement or referrals to the other agencies based on the Necessity Certification.
O’Riordan Bethel is a D.C. based law firm and SBA-certified government contractor. If you have questions, please feel free to contact us; we are operating in full telework mode and are open to receive email and phone communications.
