Huge News on PPP Loan Justification
Posted on May 13, 2020 by Shane Campbell
There have been far too many challenges in obtaining Paycheck Protection Program (PPP) loans from the SBA to list. Congratulations if your company did get a PPP loan. You are now likely strategizing how to get as much of the loan forgiven as possible. Many B2B CFOs are focusing on loan forgiveness now for our existing clients.
Another more ominous concern arose recently when the SBA issued threatening commentary about the consequences of companies taking PPP loans and ostensibly not proving “justification.” “Justifying” the receipt of PPP money included the requirement of proving that no other sources of capital were available, and that existing cash flows would be insufficient to weather the COVID-19 storm. The SBA commentary suggested criminal proceedings if companies indeed failed to justify taking the money.
The Updated PPP FAQ’s Question 46 Published May 13, 2020 provides significant relief for most PPP loan recipients, especially those beneath the $2M loan threshold. The SBA puts most of these concerns to rest by stating:
“… Any borrower that … 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…”
PPP loan recipients over $2M also received some relief from FAQ 46. If the SBA determines that a PPP loan above $2M “lacked an adequate basis for the required certification” the SBA will inform the lender (bank) that the loan is not subject to forgiveness. If the company then repays the loan, there will be no further administrative enforcement. So the fear of criminal implications is off the table.
This is great news for our clients and most PPP recipients who simply want to focus on recovering from the COVID-19 economic shutdown.
