On Wednesday, May 13, 2020, the Treasury Department, after consultation with the Small Business Administration, issued new guidance regarding good faith certifications for businesses that received Paycheck Protection Loan (PPP) funds. After issuance of multiple statements starting in April, 2020 regarding the impact of accepting PPP funds if a business had access to other sources of liquidity, the Treasury Department announced that businesses that received loan proceeds of less than $2 million dollars will be presumed to have made the certifications for those funds in good faith.
In Guidance response #46, the Treasury Department stated, “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 been made the required certification concerning the necessity of the loan request in good faith.” The Treasury department went on to explain that a safe harbor for loans with an original amount of less than $2 million dollars was appropriate because it considered that loans below the $2 million threshold were generally given to businesses which were “less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that had obtained larger loans.”
Treasury also explained that another benefit of this presumption was to provide the SBA with the ability to conserve its limited resources to conduct audits and reviews on larger loans which would yield greater results in a search for abuse.
If you have further questions, about these or other questions about the Paycheck Protection Plan loans click on this link to review the most recent Paycheck Protection Plan FAQ’s.
If you have additional questions, on this or other employment related issues arising in the context of COVID-19, feel free to contact Sheryl J. Willert at SWillert@williamskastner.com.