SBA Releases Guidance on Good Faith Certification

by: Smith and Howard

May 13, 2020

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Earlier today (May 13, 2020) the Small Business Administration (SBA) and Department of the Treasury released FAQ #46. The new FAQ provides clarification for businesses taking Paycheck Protection Program (PPP) loans, regardless of the loan size.

Businesses taking a PPP loan with an original principal amount of less than $2 million will automatically be granted safe harbor relief with regard to the “good faith certification” it is required to provide. According to the FAQ, the “SBA has determined that this safe harbor is appropriate because borrowers with loans below this [$2 million] 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. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees.”

Businesses taking loans greater than $2 million will be subject to a compliance review by the SBA. According to FAQ #46, if the “SBA determines 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 will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from the SBA, the SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. The SBA’s determination concerning the certification regarding the necessity of the loan request will not affect the SBA’s loan guarantee.”

To read the full FAQ #46, click here.

Please contact your Smith and Howard advisor with any questions you may have.

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