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SBA and Treasury Provide Safe Harbor on
Good Faith Certification for PPP Loans
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On May 13th, the SBA and Treasury released a new FAQ #46 on PPP loans that will provide significant comfort to borrowers of smaller loans. The FAQ states that SBA and Treasury have "determined that the following safe harbor will apply to SBA's review of PPP loans with respect" to the good faith certification that each PPP borrower must make that "current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant." The safe harbor states:
"Any borrower that, together with its affiliates, received PPP loans with an original principal balance amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith."
The FAQ goes on to say that the SBA has determined that "this safe harbor 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 obtained larger loans." So, for loans less than $2 million, the borrower's good faith certification will not be questioned or audited by the SBA.
In addition to the comfort provided to smaller borrowers, the FAQ also gives comfort to borrowers above the $2 million threshold. It confirms that larger borrowers may still satisfy the good faith certification requirement. It also states that, if the SBA determines that a borrower who received a loan in excess of $2 million lacked an adequate basis for the certification, SBA will seek repayment of the loan balance. If the borrower repays the loan, SBA will not pursue administrative enforcement or referrals to other agencies. Based on prior guidance, large borrowers were concerned about civil and criminal enforcement actions, but this new guidance confirms that the consequences of an insufficient certification are limited to repayment, so long as the borrower repays the loan. Further, the SBA has again confirmed for lenders that its determination on the good faith certification will not impact the SBA's loan guarantee.
Overall, this is good news for both lenders and borrowers as they navigate the ever-changing PPP landscape.
The lawyers at FWW remain available to answer all of your PPP questions and will be providing ongoing PPP guidance to our clients. Please contact us at 503.228.6044 or at any of the email addresses below.
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Farleigh Wada Witt Business and Financial Services Attorneys
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Kim McGair
's practice emphasizes a wide range of litigation matters including employment, commercial litigation, commercial collections, personal injury defense, and real estate litigation. She is an advocate for her clients and provides them with sensible advice and strong representation to protect their interests and help them achieve their objectives as efficiently as possible. Kim was selected by her peers for inclusion in the Best Lawyers in America® 2018-2020 for Commercial Litigation and to the Oregon Super Lawyers list 2019 for commercial litigation.
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Hal Scoggins has been providing legal advice to credit unions since 1991, focusing on state and federal regulatory compliance, deposit and lending operations, contract and business matters, corporate governance, CUSOs, and all other aspects of financial service delivery. He frequently conducts seminars on legal matters for the Northwest Credit Union Association, Credit Union National Association councils, local chapters, and other trade groups.
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David Ludwig has more than 35 years of experience handling complicated business and financial matters. He represents small- and mid-sized companies and financial institutions in business transactions, corporate finance, commercial lending, and real estate matters. David recently served on the executive committee of the Business Law Section of the Oregon State Bar. He was by his peers for inclusion in the
Best Lawyers in America® 2019-2020 for Business Organizations (including LLCs and Partnerships).
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Brian Jolly
's
law practice focuses on corporate and general business matters, as well as estate and succession planning. With more than a decade of experience representing families, closely-held businesses, and non profit organizations, Brian brings considerable working knowledge in the areas of business formation, mergers and acquisitions, and internal and external disputes in a multitude of business and estate planning matters. Brian is a member-at-large on the Executive Committee for the Business Law Section of the Oregon State Bar.
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Dean Sandow
assists business owners, executives, professionals, families, family enterprises, and individuals plan for all stages of business and life, with an emphasis on creative use of entities, trusts, and planning techniques to maximize efficiency and tax savings and minimize administration. With a keen understanding of entity structure and management, Dean creates plans to enhance and manage assets for the client and for next generation or beyond. Dean was selected by his peers for inclusion in the Best Lawyers in America® 2018-2020 for Trusts and Estates and 2019-2020 for Corporate Law.
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Paul Migchelbrink
maintains a diverse business practice advising clients in a number of industries on corporate and general business matters, real estate, intellectual property, commercial finance, and lending. He utilizes his broad and extensive experience to help his clients make sound strategic decisions and grow their businesses.
Paul advises clients on matters throughout the business life cycle, including the formation and financing of new business ventures, ownership and ownership transitions, mergers and acquisitions, equity and debt financing, business contracts, and the protection of trademarks and other intellectual property rights. Paul was selected by his peers for inclusion in the Best Lawyers in America® 2020 for Corporate Law.
Contact Paul at 503.228.6044 or [email protected]
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Marisol McAllister's practice focuses on real estate, financial services, and business law. In her financial services practice she represents financial service providers on complex commercial lending and leasing transactions and with judicial and non-judicial real estate foreclosures. In addition, she was designated as one of the
Best Lawyers in America
® 2018-2020 for Real Estate Law.
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Brian Witt represents credit unions and CUSOs on corporate, operational, compliance, executive compensation and financial service delivery matters. Practicing law for more than 30 years, Brian has vast experience working with credit unions at all levels from the teller line to the Board room. Brian has developed extensive compliance resources for member response management, vendor management and contract review, information security programs, security response guidelines, online delivery of financial services, and credit union consumer and business lending. He was s
elected by his peers for inclusion in the
Best Lawyers in America
®
2016-2020 for Financial Services Regulation Law
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Gustavo (Tavo), Cruz, Jr. has more than 25 years of experience documenting and negotiating complex commercial loan transactions and workouts. Prior to law school, Tavo worked as a commercial lender and in commercial credit approval. He also has experience working in the special assets group of a major financial institution, so Tavo knows how important it is to properly document the loan on the front end. Tavo also has extensive experience in corporate, securities, and mergers and acquisitions transactions.
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Megan Oshiro supports the firm's business, estate and succession planning, financial services and real estate practices. Megan's internship at Willamette's Business Law Clinic, Oregon DOJ in the Financial Fraud and Consumer Protection Section, and externship with the Adidas in-house counsel in Portland bring excellent skills and working knowledge to her practice.
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