Earlier today, the SBA released FAQ 46 to its
existing FAQ fact sheet, which addresses how the SBA will review
borrowers' required good-faith certification concerning the
necessity of their PPP loan applications.
The full text of FAQ 46 can be found at
https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf)
46. Question: How will SBA review borrowers' required
good-faith certification concerning the necessity of their loan
request?
Answer: 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.
SBA has determined that this safe harbor is appropriate because
borrowers with loans below this threshold are generally less likely
to have had access to adequate sources of liquidity in the current
economic environment than borrowers that obtained larger loans.
This safe harbor will also promote economic certainty as PPP
borrowers with more limited resources endeavor to retain and rehire
employees. In addition, given the large volume of PPP loans, this
approach will enable SBA to conserve its finite audit resources and
focus its reviews on larger loans, where the compliance effort may
yield higher returns.
Importantly, 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.
The 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. SBA's determination concerning
the certification regarding the necessity of the loan request will
not affect SBA's loan guarantee.
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