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Important Update Regarding the PPP Loan Program

May 13, 2020Virtus LawNo CommentsCategories: Articles

The SBA issued new guidance in the form of additional FAQ’s today, May 13, 2020.  Specifically, the SBA provided additional information regarding how it will evaluate the “good-faith certification concerning the necessity of a loan request.” Importantly for small and some medium sized businesses in particular, the SBA stated in FAQ 46 that “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.”  Most borrowers with loans about $2 million are expected to be subject to additional audit/scrutiny in the future, per previously released SBA guidance on the issue.  However, the SBA also clarified in the recent guidance that borrowers with PPP loans about $2 million who are later determined to have “lacked an adequate basis for the required certification” will not be subject to administrative enforcement or similar criminal investigation.  Rather the penalty will be that the loan must be paid back with no eligibility for forgiveness of the PPP loan.

This is good news for many borrowers who were concerned about whether to return the PPP loan amounts or not (by May 14, 2020), based on previous guidance from the SBA about this certification.  The SBA also issued some additional guidance surrounding how hotels and restaurants with multiple locations, including those who are franchisees, can apply for the PPP loan.  You can find the most recent SBA FAQ’s here.  Virtus Law, PLLC continues to monitor developments in this (and other COVID-19 areas) and will continue to post relevant updates to this website.

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