SBA, Treasury Issue New Guidance Concerning Good-Faith Certification on the Necessity of Their Loan Request

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On May 13, 2020, the Small Business Administration (“SBA”) and Treasury Department (“Treasury”) released new guidance concerning good-faith certification for Paycheck Protection Program (“PPP”) loan requests. This new guidance clarifies that businesses seeking a PPP loan of less than $2 million will have made their request in good faith unless proven otherwise.

SBA and Treasury released this guidance because they believe that borrowers within this safe harbor threshold do not have as much access to other sources of funds that larger loan borrowers have. This similarly benefits SBA and Treasury by limiting auditing and compliance costs associated with the PPP and enabling them to use their resources to review larger, more significant loan requests.

Today’s new guidance also somewhat negates the May 14, 2020 safe harbor deadline that was previously in place, but only for borrowers who made the initial certification in good faith. For all others, if, after careful review of the law and the guidance that has come out previously, the borrower believes their certification was inaccurate, they should still return the funds.   However, for those that made the certification in good faith, should SBA determine that a borrower’s request for a loan exceeding $2 million was incorrect, said borrowers will not face any adverse administrative action so long as the loan is repaid. 

It is important to note that this does not modify any other eligibility requirements, nor does it grant relief to parties who were ineligible due to size or other considerations. This guidance merely addresses the uncertainty surrounding the “need” analysis.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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