On May 13th, 2020, the Treasury Department provided additional guidance regarding how the SBA will review borrowers’ good faith certifications with respect to the Paycheck Protection Program.
Any borrower that, together with its affiliates, received PPP loans with an original principal 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.
While this isn’t that different from what we already knew, they have at least now made it very clear that they will not be pursuing good faith certification verifications for those with under $2 million in PPP funding.
The SBA determined that borrows with loans below this amount would be far less likely to have had access to adequate sources of liquidity than those receiving PPP loans in larger amounts and will not be audited on their good-faith certification.
Additionally, the SBA recognizes in this guidance that borrowers with loans greater than $2 million may still have an adequate basis for making the required good-faith certification based on their individual circumstances. When reviewed the SBA will look for compliance with the rules set forth in the PPP interim final rules and in the borrower application form. If the SBA determines that a borrower of over $2 million lacks adequate basis for the good faith certification, they will seek repayment of the outstanding loan balance and inform the lender that the loan is not eligible for forgiveness.
If the borrower repays the loan after receiving such notification from the SBA, they will not pursue administrative enforcement or referrals to other agencies based on its findings regarding the good faith certification.