This morning (May 13, 2020), the Small Business Administration (“SBA”) published Paycheck Protection Program (“PPP”) Loans Frequently Asked Question (“FAQ”) #46 and its answer. The SBA provides therein 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 in good faith the required certification in its application concerning the necessity of the loan requested.
This required certification has been the source of significant controversy. The controversy has slowed down the demand for the second tranche of PPP loans. You can learn more about that controversy as discussed in two of our recent commentaries on our website, by clicking here.
The SBA decided that a $2 million loan is a reasonable measurement of a business’ access to capital. The SBA says that further documentation of the request and further review of the “access to adequate sources of liquidity” during the COVID-19 crisis is not necessary for a business obtaining a PPP loan of less than $2 million.
The SBA goes on to say that a business that receives a PPP loan of greater than $2 million may still have an adequate basis for making the good faith certification. However, the FAQ implies that the certifications of such loans will be reviewed.
The FAQ goes on to set forth generally the remedy for a greater-than-$2 million loan where the SBA finds that the borrower lacked an adequate basis for making the required good-faith certification and notifies the borrower of its decision. If the borrower repays the loan after notification from the SBA, “SBA will not pursue administrative enforcement or referrals to other agencies based on its determination…“ See FAQ #46 in its entirety by clicking here.
A side note: the new FAQ #46 addresses loans of less than $2 million and loans of greater than $2 million. It does not address loans of exactly $2 million. We hope that is not your PPP loan amount. If so, at least for now, your loan is not addressed in FAQ #46.
Many questions still exist with regard to PPP loans and the rules for forgiveness of all or part of a PPP loan. However, this bright-line test brings relief to many small businesses that have obtained or are seeking PPP loans.
For more information check out HM&M’s COVID-19 Resources page.
HM&M COVID-19 ResourcesRelated Posts
The COVID-19 pandemic has disrupted business in Texas like never before and it has changed how employers in Texas conduct their business. With the recent reopening of businesses, employers are hiring new or rehiring former ...
Yesterday evening (March 31, 2020), the Small Business Administration released the Paycheck Protection Program (“PPP”) loan application form and information sheets for borrowers and for lenders. We include below a link to each of these ...
The humorist and political wit Will Rogers is credited with this comment: “I am not a member of any organized political party. I am a Democrat.” As we go to press with this missive at ...
Friday (May 15, 2020) evening, the Small Business Administration (“SBA”) and the Department of Treasury released the Paycheck Protection Program (“PPP”) Loan Forgiveness Application (the “Application”). The PPP was enacted on March 27, 2020, as ...
Latest Blog
As this reminder was going to press, a Texas-based federal court issued a preliminary injunction prohibiting the federal ...
The landscape of gift and estate tax planning is experiencing significant shifts, with the upcoming 2026 sunset looming ...
Are you planning to make a Qualified Charitable Distribution (QCD) in 2024? Yes? Then read on … A ...
HM&M Updates
DALLAS, Dec. 11, 2024 – Springline Advisory, a trailblazing financial and business advisory firm, is proud to announce its partnership ...
Last month, Senior Manager, Pearl Balsara was invited to speak at the 2023 FPA DFW Annual Conference in ...
We are pleased to announce the winners of the 2022 HM&M Excellence Awards. Ronna Beemer, Keith Phillips, and ...