On May 13, the SBA published FAQ #46 in its continuing list of frequently asked questions, regarding the review of borrower’s good faith certification of the necessity of their loan request. Notably, the SBA announced that any borrower who (together with its affiliates) has less than $2 million in original principal amount outstanding under the Paycheck Protection Program (PPP) will be deemed to have satisfied the good faith certification standard. As a result, you should not return your PPP funds, assuming compliance with all other eligibility standards related to the PPP, if your loan (together with any PPP loans of affiliates) is less than $2 million.

What If You Borrow $2 Million or More?

For those borrowers who exceed this threshold, the FAQ does specifically state that these borrowers may still have an adequate basis for their certification based on individual circumstances, but that if the SBA determines in its review that the borrower lacked this basis, then the SBA will inform the borrower that it is not eligible for forgiveness and will seek repayment of the loan. If the borrower repays the loan in full, the SBA will not pursue administrative enforcement or referrals to other agencies based on lacking an adequate basis to make the good faith certification. It is not clear whether this demand for repayment is required immediately or simply that the loan be paid in full pursuant to the two-year term, though borrowers who are in this situation should prepare for a requirement that the loan be repaid immediately to avoid any additional penalties or other enforcement.

What’s Next?

We are following PPP developments closely and can help borrowers navigate the complexities of this program. Our team will continue to provide relevant updates and guidance on this topic.