“Necessity” Certification for PPP Loan/SBA Issues $2.0 Million Safe Harbor

The SBA has just issued an additional FAQ (#46) providing a safe harbor for smaller borrowers so far as the “necessity” certification.  Borrowers with loans less than $2.0 million (including affiliates) will automatically be deemed to have made the “necessity” certification in good faith.

The portion of the FAQ related to the safe harbor reads: 

46.         

Question: 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, 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 deadline to repay a PPP loan without penalty is May 14 if a borrower does not fall within this safe harbor and is concerned about whether the “necessity” certification can be met.

Read full FAQ here.