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 answer to question 46 is as follows:
When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” 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.
What does this mean?
For Loans Less than $2 million – This statement removes the requirement for borrowers of less than $2 million to reconsider their certification of economic uncertainty based on the sources of liquidity available.
For Loans Greater than $2 million – FAQ 46 does not provide clarification to borrowers with loans greater than $2 million of what is adequate basis for the certification that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”
Note – According to the SBA, all loans over $2 million are subject to review; however, the SBA may review PPP loans below that amount if deemed appropriate.
Please see the published FAQs attached regarding this and be on the lookout for updated guidance.