Worried About Whether To Repay PPP Loan Under “Good-Faith Certification”?

May 14, 2020

Worried About PPP Loan Repay Good Faith Certification ?

When submitting a PPP loan application, all borrowers were required to certify in good faith “current economic uncertainty makes this loan request necessary to support the ongoing operation of the Applicant.” Over the past few weeks, the SBA has provided further guidance on this certification. Also, SBA guidance provided that a borrower who applied for a PPP before April 24 and repaid the loan in full by May 14 would be deemed to have made this certification. Today, the SBA identified through its Frequently Asked Questions (FAQ) 47 an extended date from May 14 to May 18.

On May 13, 2020, the SBA through its published FAQ 46, provides further guidance on the good faith certification. FAQ 46 states that “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.” This is to say that if a borrower had combined PPP loans of less than $2 million, the borrower does not need to return the loan by May 18 to satisfy this safe harbor rule.

The SBA in FAQ 46 goes on to state: “The SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans.”

Further, the SBA indicates in the FAQ that borrowers with loans more than $2 million that do not repay the loan by May 18 may still have an adequate basis for making the good faith certification. However, the SBA has indicated that all PPP loans in excess of $2 million will be subject to review for compliance with the program’s requirements.

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