New Paycheck Protection Program Answers: Loan Repayment and Good Faith Certification

The Small Business Administration (SBA), along with the US Department of Treasury, released FAQ #46 addressing this question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?

The general idea is borrowers who receive a Paycheck Protection Program (PPP) loan less than $2 million will be deemed to have made the required certification of economic uncertainty and repayment of the loan is unnecessary. When determining the amount of the PPP loan, do not forget to aggregate the amounts by the affiliates.

What is “good faith?”
When borrowers apply for a PPP loan, they must certify in good faith the loan request is necessary to support ongoing operations, due to current economic uncertainty.

Safe Harbor
The SBA has consulted with the Treasury to determine a safe harbor in which “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.” This safe harbor will apply to the SBA’s review of received PPP loans and will also promote economic certainty as employee retention is key for PPP loan forgiveness.

The threshold was determined based on the general knowledge that borrowers with loans greater than $2 million are more likely to have access to adequate sources of liquidity in the current economic environment. With the large volume of PPP loans, this safe harbor will enable the SBA to focus on larger loans for reviews and audits.

What if I have a PPP loan greater than $2 million?
Those who do not satisfy this safe harbor may still qualify for loan forgiveness if they meet the requirements, which can be found here; including the required good-faith economic uncertainty certification, based on their circumstances in light of SBA guidance and language. These loans will be subject to review by the SBA to determine whether all program requirements were satisfied. If the SBA determines the borrower lacked an adequate basis for the required good-faith certification in its review, the SBA will seek repayment of the outstanding PPP loan balance and will inform the lender they are not eligible for loan forgiveness. Administrative enforcement or referrals to other agencies will not be pursued by the SBA if the borrower repays the loan after receiving notification. Still, the necessity of the loan request certification will not affect the SBA’s loan guarantee.

If you have questions regarding your PPP loan and its forgiveness, contact a KerberRose trusted advisor here.