• Loan requests less than $2 million threshold now deemed to have been made “in good faith”
    • SBA will conserve “finite audit resources” for larger loans, where compliance is more necessary
    • Mnuchin: Criminal liability for those who lie on self-certification

On Wednesday, the SBA issued additional guidelines to address and clarify any ambiguity surrounding the requirement for all PPP applicants to self-certify that the loan is necessary to their business’s survival. In the answer to Frequently Asked Question (FAQ) 46, the SBA states that it, “… 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 safe harbor was created to “…promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees” while allowing the “…SBA to conserve its finite resources and focus its reviews on larger loans.” Furthermore, the SBA determined that borrowers below the $2 million threshold “…are generally less likely to have access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans.”

This additional guidance was welcomed news to the small business community that was sent into panic earlier in the month by SBA FAQ 31, which warned of potential civil and criminal penalties for businesses that requested PPP funding but did not necessarily need it. Businesses were unclear on how to define “economic uncertainty” as it relates to their operations and worried that the PPP funding would not be deemed “necessary” if they had access to additional liquidity, such as a line of credit or large cash reserve, at the time of the PPP loan application. FAQ 31 was issued shortly following a slew of bad press for the SBA, with many large organizations receiving PPP funding, while other small businesses were shut out. The consequences in the FAQ were further echoed by Senators and government officials in an attempt to dissuade any business owners from applying under fraudulent circumstances.

While some businesses can breathe easier, others still remain in the dark on how to prove the PPP loan that their business received was necessary for survival. According to both FAQ 46 and Secretary Steven Mnuchin, all PPP loans over $2 million will be audited “to ensure they were justified” and will carry criminal liability for those who violate their self-certifications.

As lawsuits begin to be filed by business owners against the Federal government, visit our DSJCPA COVID-19 Information Center to follow the latest updates, both from the courts and Congress.


Stephen Jahelka
Chief Business Officer, Disaster Relief Consultant

516-541-6549 | Email

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