CARES Act Paycheck Protection Program May 7, 2020 Repayment Option
The Treasury Department posted updated Frequently Asked Questions (FAQs) on April 23, 2020.
FAQ #31 deals specifically with large companies and whether they qualify for PPP loans when they might have other adequate sources of liquidity. However, the FAQ#31 answer states that all borrowers should review their certification that their PPP loan was “necessary to support the ongoing operations…” of their business.
While some may argue that because FAQ question #31 refers to “businesses owned by large companies” it is limited in scope, the #31 answer refers to “all borrowers” so it is not clear how restrictive Treasury/SBA will be in applying their analysis to a particular borrower. Answer #31 in part states: “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.”
We recommend you discuss with your legal counsel if you have any concern with your certification for a PPP loan (and whether the SBA would agree the certification was made in good faith). Treasury FAQ #31 creates a new safe harbor by stating that if a PPP loan applied for prior to April 23, 2020, is repaid in full on or before May 7, 2020, the SBA will deem that the PPP loan certification made by the borrower will be deemed to have been made in good faith.
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