News

SBA Begins Accepting New PPP Loan Applications; Good Faith Certifications

8 July 2020

On Wednesday, July 1, 2020, the U.S. House of Representatives joined the Senate in passing a measure to extend the deadline to apply for PPP loans from the SBA – the extension passed both Chambers by unanimous vote, and President Trump signed it into law the day it was passed in the House.

The initial application period ended at midnight on June 30; the extension approved will be for 5 weeks, ending August 8, 2020.

At 9:00 a.m. on Monday, July 6, 2020, the SBA resumed accepting PPP loan applications.

For those whose loans have already been approved and the funds received, when you begin your application for loan forgiveness (Form 3508 or Form 3508EZ), you may be wondering whether the SBA will come back to you with questions concerning your certification (when applying for the PPP loan) in good faith that “Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”

If your loan is for an amount less than $2 million, the answer is “probably not.”

According to the SBA’s PPP FAQs:

46. Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?

Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to 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.

However, the SBA does reserve the right to review any and all PPP loans “as appropriate.”

To support your good faith certification, should the SBA come asking, you should maintain a file of all documentation you can muster – internal and external correspondence, written or electronic, concerning any changes in staffing, e.g., employee pay, layoffs or resignations, and/or offers of rehire.

Any unusual circumstances or changes to processes such as purchasing supplies should also be documented – if you had to go to an unusual supplier because of the impact of COVID-19, keep these invoices together, along with any correspondence illustrating the necessity of the change.

Know and document the ways in which the coronavirus affected your industry (both nation-wide and in-state) and your operations, and the impact(s) of Federal, State, and local regulations on that industry and your business in particular.

In addition to maintaining documentation, it might be wise, especially for those with larger PPP loans, to write a narrative memo, drawing on all the facts and circumstances affecting your business during this time of uncertainty, and supporting the good faith of your certification that the loan was necessary.

These are just a few examples of what you can do – and remember, this is the Federal Government – less is not more in these circumstances. Redundancy is better than falling short. If you have questions or concerns, consult your advisor.

Tune in next week – there is bound to be something new coming.

If you have questions on the PPP, please click here to email us directly – we are here to help.