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PPP Loan Updates – Good Faith Certifications and SBA Review Process

May 04, 2020

Updates continue to be issued by the SBA regarding the Paycheck Protection Program (PPP) loan provisions through the issuance of new Frequently Asked Questions (FAQs). Recent focus has been placed on FAQ 31 in reference to the statement “Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.”

Below are certain updates regarding good faith certifications and the SBA review process through May 3, 2020:

  • While FAQ 31 initially focused on “large companies”, FAQ 37 expanded that focus to include all businesses, both public and private.
  • For those entities that have access to “other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business”, they do not qualify for a PPP loan. The SBA uses an example that “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 company should be prepared to demonstrate to the SBA, upon request, the basis for its certification.”
  • With this newly issued guidance, the SBA established a safe harbor: “Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by the SBA to have made  the required certification in good faith.”
  • Under FAQ 39, “To further ensure that PPP loans are limited to eligible borrowers in need, the SBA has decided, in consultation with the Department of Treasury, that it will review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the borrower’s loan forgiveness.”
  • Through the Freedom of Information Act, certain information will be made public, as already evidenced by the publicity received by certain high-profile loan recipients. We anticipate this scrutiny to increase over the life of this program.
  • We recommend you consult your attorney if you have concerns regarding these updates.  

To review the FAQs issued through May 3, 2020, please visit https://www.sba.gov/sites/default/files/2020-05/Paycheck-Protection-Program-Frequently-Asked-Questions_05%2003%2020.pdf.

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Sincerely,

Reynolds Bone & Griesbeck PLC