Paycheck Protection Program:  If you received less than $2 million in PPP, you are deemed to have made “Need Certification” in good faith

Attorney Rebecca L. Simpson

The SBA issued new guidance today which provides that If you and your affiliates combined received less than $2 million in Paycheck Protection Program (PPP) funds, you will be deemed to have made your “need certification” in good faith.  Upon application, every PPP borrower was required to make a good faith need certification, which reads:

Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.

New guidance clears up confusion

Over the last several days, the SBA had issued guidance reminding borrowers that this “need certification” had to be made in good faith, and warning borrowers that if it was not made in good faith their PPP loan should be repaid by May 14, 2020.  This May 14 deadline had left many questioning what the SBA would consider in determining if a borrower made the need certification in good faith, and if the PPP should be repaid by tomorrow.  The SBA promised more guidance on this issue, which came today in new question 46 in the SBA’s FAQ document.

New safe harbor for those who received less than $2 million in PPP funds

The SBA defined a new safe harbor today in question 46 of its FAQ document:

Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?

Answer: …  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 request in good faith. …

Purpose of less than $2 million safe harbor

The answer to FAQ 46 goes on to explain the reasons for this new safe harbor, including:

  • Those with PPP loans under $2 million are generally less likely to have had access to adequate sources of liquidity in this economic environment than those with larger loans
  • As PPP borrowers with more limited resources work to retain and rehire employees, this safe harbor will provide greater economic certainty
  • This safe harbor enables the SBA to focus its limited resources on larger loans, “where the compliance effort may yield higher returns”

Treatment of borrowers who received more than $2 million

While the answer to FAQ 46 acknowledges that those with PPP loans over $2 million may be able to show that their need certification was made in good faith, it also reiterates that the SBA will review all PPP loans in excess of $2 million.  And, it provides that if the SBA determines that that the borrower “lacked an adequate basis” for the certification, then the borrower must repay the loan and will not be eligible for loan forgiveness.  It further provides that if the borrower then repays the loan, the SBA will not pursue administrative enforcement.


For assistance with an application for a PPP loan or for PPP loan forgiveness, contact Rebecca L. Simpson (513.797.2856).