SBA Publishes New Guidance Regarding Certifications of Necessity for PPP Loans

SBA Clarifies Today that Employers with Less Than 2 Million Will be Deemed to have Made a Good Faith Certification for the Necessity of the Loan.

The SBA updated its FAQs today adding a new safe harbor for small businesses that received a PPP Loan with proceeds that are less than $2 Million.  FAQ 42 specifically states:

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.

The SBA determined that this ruling was necessary because (1) borrowers with loans under the 2 Million threshold are generally less likely to have access to sources of liquidity than borrowers with larger loans; (2) it will help promote economic certainty for smaller borrowers who are attempting to rehire and retain employees and (3) it will allow SBA auditors to focus on reviewing the larger loans which would yield higher returns.   

For loans greater than $2 million, if the SBA determines that a borrower lacked a sufficient basis required for the good faith certification the SBA clarifies that it will seek repayment of the outstanding PPP Loan balance and the borrower will not be eligible for loan forgiveness.   If the borrower repays the loan after notification from the SBA it will not pursue “administrative enforcement.”    The SBA also stated that the determination will not affect the SBA’s loan guarantee.

For Employers that have loans that are over the $2 Million threshold and are considering or have already returned their PPP Loan, you may still be eligible to claim the Employee Retention Tax Credits. CTR is already working with several clients to assist them with claiming their tax credits. For some employers, the credits may amount to a significant amount of money.   As such, we encourage you to reach out to us if you do not have a PPP Loan and have not taken advantage of these credits.  

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