SBA Issues Guidance and Safe Harbor on “Good Faith” Certification
There has been a lot of discussions (and news coverage) around businesses with access to liquidity receiving Paycheck Protection Program (PPP) loans. SBA has been addressing these questions in their Paycheck Protection Program Frequently Asked Questions (albeit not very timely), there is still some ambiguity with liquidity, good faith certification and loan forgiveness.
Questions 31, 37 and 43 help to address these matters, but still leaves questions around the “good faith certification” as it relates to the loan request. Treasury Secretary Mnunchin established a date of May 7th (now amended to May 18th) for Companies to return their PPP proceeds and not face questions with regard to whether their certification was indeed in good faith.
In summary, any borrower, together with its affiliates, must certify that the loan request is necessary to support the ongoing operations of the Applicant. On May 13th, the SBA provided some relief in answering this question.
The SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to the SBA’s review of PPP loans with respect to this issue:
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.
Borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. (See our prior article on Loan Certification Updates for documentation you should retain if you are challenged on this matter.)
Below is a recap of the questions surrounding liquidity, good faith certification and safe harbor under Question 46.
Our BMF Advisors stand ready to help with questions on PPP loans or other answers you need to keep your business moving forward. Visit our COVID-19 Resource Center for additional information and resources for you and your business.
James E. Merklin?>
CPA/CFF, CFE, CGMA, MAcc
About the Authors
Stay up-to-date with the latest news and information delivered to your inbox.