New PPP FAQ — Good Faith Certification of Economic Uncertainty

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May 13, 2020

The US Department of Treasury released FAQ #46 this morning providing guidance on “how will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request.”

Any borrower, together with its affiliates, that received PPP loans with an original amount of less than $2 million will be deemed to have made the required certification of economic uncertainty concerning the necessity of the loan request in good faith without further evidence. This means that borrowers with original loan amounts of less than $2 million should be safe from SBA review of their prior certification of economic necessity.   Make sure that in determining the amount of the loan, amounts borrowed by all affiliates must be aggregated

Borrowers with loans greater than $2 million will be subject to review by the SBA to determine whether all program requirements were satisfied including whether the borrower had adequate basis for making the required good-faith economic uncertainty certification.  If the SBA determines that the borrower lacked an adequate basis for the certification, the SBA will seek repayment of the outstanding PPP loan balance and the loan will not be eligible for forgiveness.  If the borrower repays the loan after receiving notification from the SBA of the repayment requirement, the SBA will NOT pursue administrative enforcement or make referrals to other agencies.  SBA’s determination concerning certification will also not affect SBA’s loan guarantee.

This seems to suggest that if upon SBA review there is a determination that the borrower did not have an adequate basis for the economic uncertainty certification, the “penalty” will be repayment and denial of any loan forgiveness.  However, while “administrative” enforcement will not be pursued in such instance by the SBA, it is likely that criminal enforcement could still be in the cards in the case where there is an allegation of fraud.

As a reminder, the deadline for repayment of PPP loans to take advantage of the safe harbor is tomorrow, May 14.

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