SBA and Treasury Finally Provide Promised Guidance on Borrowers’ Good Faith Certification under the Paycheck Protection Program

Today, the SBA and Treasury issued their previously promised guidance regarding how the SBA would review borrowers’ good faith certifications in applications for Paycheck Protection Program (PPP) loans. The new guidance comes in two parts.

First, for borrowers who, together with their affiliates, received PPP loans with an original principal amount of less than $2 million, there is a new safe harbor under which these borrowers will be deemed to have made the certification in good faith.

Second, the new guidance (Q&A-46) takes up previous statements by the SBA that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by the SBA for compliance with PPP requirements. In those prior statements, the SBA stated that if it determined in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, the SBA would seek repayment of the outstanding PPP loan balance and would inform the lender that the borrower is not eligible for loan forgiveness. Today’s guidance, however, notes that if the borrower repays the loan after receiving such a notification from the SBA, the SBA will neither pursue administrative enforcement nor provide referrals to other agencies. This additional reprieve appears to be in addition to (and not a replacement of) the earlier-promulgated safe harbor for borrowers who may have “wrongly” received a PPP loan and pay it back by May 14, 2020, thus taking the pressure off the need to make a quick decision.

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