May 5, 2020 |
On May 5, the Treasury Department and SBA released FAQ #43 extending the Paycheck Protection Program (PPP) safe-harbor repayment date from May 7 to May 14. Thus, any PPP borrower who repays their loan by May 14, 2020 will be deemed to have made the required economic need certification on the SBA loan application in good faith. On the loan application, borrowers certify that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” According to the FAQ, the SBA will be providing additional guidance on how it will review the certification prior to May 14, 2020.
This controversial borrower need certification was first addressed in FAQ #31 and appeared to relate to a question involving businesses owned by large companies with adequate sources of liquidity. The SBA reminded borrowers to review the certification and “make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.” FAQ #31 was later applied to businesses owned by private companies with adequate sources of liquidity. Until this recent extension of time to repay, the Treasury in FAQ #39 stated that it will review all PPP loans in excess of $2 million, in addition to other loans as appropriate. No additional details or guidance has been issued clarifying how borrowers should comply with this review standard.
Until further clarifying guidance is issued, Marks Paneth recommends that borrowers carefully document the financial impact on your business that includes, at a minimum, detailed summaries and projections as well as comprehensive narratives describing anticipated business operations supporting the need for the PPP loan.
Marks Paneth will continue to monitor developments and will provide updates as they become available. For additional information or assistance, email responseteam[at]markspaneth.com.
Compliments of Marks Paneth LLP – a member of the EACCNY.