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Guidance Issued for PPP Loan Certification
Businesses who are participating in the SBA-administered Paycheck Protection Program (PPP) are required to certify in good faith that the loan request is "necessary to support the ongoing operations of the applicant." Now the SBA has released more detailed guidance on how that certification will be reviewed and enforced.
For borrowers who received a loan of less than $2 million (including all affiliates combined) there is a "safe harbor." These loans will not be reviewed and the borrower will be deemed to have made the required certification in good faith. As long as the business uses the loan proceeds for approved purposes (payroll, utilities, rent and mortgage interest) and in the appropriate ratio (at least 75 percent must go toward payroll) the borrower should be eligible for loan forgiveness.
Borrowers who receive more than $2 million in loan proceeds (again, aggregated with loans made to all affiliates) are subject to having their compliance with certification of necessity reviewed by the SBA. If it is determined that there is an inadequate basis for making the certification the loan will not be eligible for forgiveness. If the borrower then repays the loan the SBA will not pursue administrative enforcement or referral to other agencies.
Borrowers with PPP loans greater than $2 million may still have an adequate basis for making a good faith certification of necessity, subject to an SBA review.
If you have questions about the Paycheck Protection Program and whether or not your PPP loan is eligible for potential loan forgiveness, please contact Gray, Gray & Gray at (781) 407-0300.

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