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THE CARES ACT: Paycheck Protection Program

Treasury Announcement:  PPP Loans under $2 million automatically meet the the Certification Concerning the Need for a PPP Loan  Treasury issues FAQ # 46 today, May 13, 2020, as follows:

FAQ 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

SBA has determined that this safe harbor is appropriate because borrowers with loan below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.

Importantly, borrowers with loans greater than $2 million that do not satisfy this safeharbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, an other PPP loans as appropriate, will be subject to review by SBA for compliance wit program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form.


If SBA determines in the course of its review that a borrower lacke an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repay the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concernin the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.


Eric Bailey is a registered representative of Lincoln Financial Advisors. Securities and advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. Bailey Wealth Advisors is not an affiliate of Lincoln Financial Advisors. CRN-3088216-051520 This material is for use with the general public and is designed for informational or educational purposes only. The information and views provided in this material do not necessarily reflect the views or opinions of Lincoln Financial Group or Lincoln Financial Advisors. It is not intended as legal, tax, estate or investment advice. Lincoln Financial Advisors and their respective employees, representatives, and/or insurance agents do not provide estate, tax, accounting, or legal advice. Individuals should consult an independent lawyer or advisor as to any tax, accounting, or legal statements made herein.