Announcement – The Treasury Department updated its FAQS regarding the economic uncertainty and need certification to be made by PPP applicants/borrowers, requiring that borrowers take into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations. Businesses must be prepared to provide documentation in support of their certifications. Businesses are advised to examine their projections in light of the current pandemic crisis, to determine whether they can in good faith make the certifications – e.g. if their businesses have been adversely affected, whether they may experience shortages in supply, inventory, labor which may impact their ongoing operations. If they determine that they cannot make the required certification in good faith, they should consider repaying the loan in full by May 7, 2020.
Please see below text extracted from the Program FAQs:
31. Question: Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?
Answer: In addition to reviewing applicable affiliation rules to determine eligibility, all borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application. Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers still must certify in good faith that their PPP loan request is necessary. Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification. Lenders may rely on a borrower’s certification regarding the necessity of the loan request. Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith.
Please be reminded that the Treasury Department and the SBA continue to update or issue guidance documents and directives pertaining to this program. You are encouraged and advised to regularly check for programmatic guidelines which may affect your spending plans. Keep checking the Genova Burns' COVID-19 Resource Center for updates as we continue to monitor the issuance of the guidelines.
For additional help and guidance, please contact firm Counsel Keith A. Krauss, Esq. at email@example.com or Associate Young-Ji Park, Esq. at firstname.lastname@example.org or 973.533.0777.
Tags: COVID-19 • Paycheck Protection Program • PPP • SBA • Keith A. Krauss • Young-Ji Park • CARES Act