|Recently, the SBA updated its Frequently Asked Questions Document to add FAQ 31. The new FAQ provides much-needed clarity regarding program qualifications specific to businesses with access to other sources of liquidity to support their ongoing operations. Any business that received a Paycheck Protection Program (PPP) loan prior to the issuance of this new guidance and who now believes that they do NOT demonstrate the necessity for the loan, can repay the loan in full by May 7, 2020. Any business that does so, will be deemed by the SBA to have made the required good faith certification on their PPP loan application. This certification indicated that the “current economic uncertainty” of the COVID-19 pandemic makes such a loan for their business “necessary to support their ongoing operations.” Unfortunately, the initial guidance from the SBA did not provide any definition or specifics regarding such parameters. |
We realize that all businesses do not know how at this time this pandemic will affect their business. Given the revised guidance issued by the SBA, we encourage you, your organization’s management, and board of directors to carefully and immediately review your company’s financial situation and consider whether your circumstances fall within the spirit and intent of this economic relief program.
Businesses who have received PPP loans and are later found to have not qualified under the eligibility rules and/or businesses who do not use the funding in accordance with the terms of the program, could be subject to significant legal or regulatory consequences and possible reputational damage for having pursued these loans.
While most recipients will qualify and receive the funding because of their need, we want to keep you informed of the potential risks of receiving these funds. Like all federally funded programs, PPP loan will be public information at some point. If your business is one that has a sensitivity to having this information become public knowledge, the payback may be something to consider. Recent press has indicated that the government will perform a full audit on any recipient of $2 million or more from this program.
If you do receive and keep PPP funding, it is critical that you maintain complete and accurate documentation to support your eligibility for such funding, the specific use of these funds, as well as your qualifications for forgiveness under the terms of the program. This documentation will be crucial were your business to be audited and/or investigated. Many of the factors influencing whether you qualify or should apply for these loans are organization specific. We encourage you to consult with legal counsel if you have questions regarding your organization’s eligibility to receive funds.
We recognize that these are difficult times, and we remain committed to supporting you.
Source: Small Business Administration