PPP FAQ #46 - Regarding Good-Faith Certification

By Freed Maxick on May, 14 2020
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PPP

On May 13, 2020 the SBA released an update to FAQ 31 and FAQ 43 addressing borrowers’ required good-faith certification concerning the necessity of their loan request. 

Two key takeaways from FAQ#46 are:

  • 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. Borrowers’ must include its affiliates to the extent required under the interim final rule on affiliates issued on April 15, 2020.
  • Borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have 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. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. 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 conclusion, the SBA appears to have softened its stance with regard to administrative enforcement.

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