SBA Issues Updated Necessity Certification Guidelines – PPP Loan Review Threshold Set At $ 2 Million | Womble bond dickinson
After issuing the customer alert below, the SBA also released FAQ n ° 47 extend the date of the safe harbor period to return PPP funds to May 18, 2020.
A day before the US Small Business Administration (SBA) announced the May 14 deadline, the SBA issued guidance on how it will determine whether a borrower has acted in good faith during required certification determining the need. of the borrower’s loan application. For more information, you can check https://www.paydaynow.net/`s website.
The directions are set out in the SBA FAQ n ° 46, which reads as follows (emphasis added):
46. Question: How will the SBA review the bona fide certification required from borrowers regarding the necessity of their loan application?
Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]The current economic uncertainty makes this loan application necessary to support the applicant’s ongoing operations. The SBA, in consultation with the Treasury Department, has determined that the following safe harbor will apply to the SBA’s review of PPP loans with respect to this matter: Any borrower who, along with its affiliates, has received PPP loans with an initial amount of less than $ 2 million in principal will be deemed to have made the required certification regarding the necessity of the bona fide loan application. The SBA has determined that this safety rule is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers who have secured loans. larger loans. This safe harbor will also promote economic certainty, as PPP borrowers with more limited resources struggle to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will allow the SBA to keep its limited audit resources and focus its reviews on larger loans, where the compliance effort can generate higher returns. It is important to note that borrowers with loans greater than $ 2 million who do not meet this safety rule may still have an adequate basis for obtaining the required good faith certification, depending on their individual circumstances. in light of the language of certification and ASB guidelines. The SBA has previously stated that all PPP loans over $ 2 million, and other PPP loans, if any, will be subject to review by the SBA to verify their compliance with the program requirements set out in the Interim Final Rules of the PPP and in the borrower’s application form. If the SBA determines during its review that a borrower did not have an adequate basis for the required certification regarding the necessity of the loan application, the SBA will request repayment of the outstanding PPP loan balance and notify the lender. that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from the SBA, the SBA will not pursue administrative execution or referrals to other agencies based on its determination with respect to the certification regarding the need for the loan. loan application. The SBA’s decision regarding certification of the necessity of the loan application will not affect the SBA loan guarantee.
Essentially, FAQ # 46 means the following:
- Borrowers who, when combined with their affiliates, have received Paycheck Protection Program (PPP) loans of less than $ 2 million are deemed to have made the certification in good faith.
- Borrowers who, when combined with their affiliates, exceed the threshold of $ 2 million will not be subject to criminal or other penalties, as long as the loan is repaid in accordance with the instructions of the ASB, and will not be liable to return funds only in the event that the ASB determines that the borrower did not have an adequate basis for the required certification.
To determine if a borrower is in SBA Safe Harbor, we recommend borrowers confirm whether any affiliates have obtained PPP loans and, if so, the loan amount. Borrowers should also note that the $ 2 million threshold only applies to required certification of necessity and that they must otherwise qualify for PPP loans in accordance with the CARES Act and the Rules and Guidelines of the SBA.
The protection period for the return of PPP funds expires now May 18, 2020. Borrowers who, when combined with their affiliates, have received loans over $ 2 million should decide to return the funds as soon as possible. For more information on certification requirements and protection period, please see our May 1 customer alert and our Customer alert of May 6. In the May 1 alert, we provided a list of factors to consider in determining whether the certification was done in good faith and suggested that borrowers should keep detailed records to support the loan application.
As always, we remain available to discuss the individual situation of a borrower.