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

13 May SBA Answers: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?

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,20
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.
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. This safe harbor will also promote economic certainty as PPP borrowers with
more limited resources endeavor to retain and rehire employees. In addition, given the
large volume of PPP loans, this approach will enable SBA to conserve its finite audit
resources and focus its reviews on larger loans, where the compliance effort may yield
higher returns.
Importantly, borrowers with loans greater than $2 million that do not satisfy this safe
harbor may still have an adequate basis for making the required good-faith certification,
based on their individual circumstances in light of the language of the certification and
SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and
other PPP loans as appropriate, will be subject to review by SBA for compliance with
program requirements set forth in the PPP Interim Final Rules and in the Borrower
Application Form. If 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, 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 SBA, 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. SBA’s determination concerning
the certification regarding the necessity of the loan request will not affect SBA’s loan
guarantee.21

To Read More SBA FAQ Answers:  https://www.sba.gov/sites/default/files/2020-05/Paycheck-Protection-Program-Frequently-Asked-Questions_05%2013%2020.pdf