SBA & Department of Treasury Offers New Guidance on PPP Loans
*This post has been updated.
The Small Business Administration (SBA) & US Department of Treasury issued an updated FAQ last week. For the full guidance, see https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf
As this is a resourceful collaboration between the SBA and the Department of Treasury, we would like to make note of two important guidance that may affect some Paycheck Protection Program (PPP) borrowers.
Question 39 confirms that the SBA will audit all PPP loans in excess of $2 million upon submission of their application for loan forgiveness. This update also specifies that implementation guidance of this procedure will also be forthcoming.
As referenced in Q39, Question 31, addresses the PPP loan qualifications of large company-owned businesses with adequate sources of liquidity to support the ongoing operations. Stating that prior to the application process, borrowers must certify that current economic uncertainty made the loan request necessary to support the ongoing operations. According to the Treasury, “it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.” Provisions have been established that any borrower that applied for the loan prior to this updated guidance and repays the loan by May 7, 2020, will be found in good faith by the SBA.
*Update: There has been some discussion concerning repayment of the PPP loan for those borrowers who had adequate sources of liquidity to support the ongoing operations. When the SBA and the Department of Treasury released Question #31 in their FAQ it left many businesses concerned about what they should do.
In an effort to clarify and reduce concern, they released an additional question to their FAQ guidance. Question 46 talks about a safe harbor amount. In that, “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 in good faith.” For full details of question 46 and all of the other FAQ please follow the link above.