PAYCHECK PROTECTION PROGRAM: SAFE HARBOR ON CERTIFICATION OF NEED CLOSES THIS THURSDAY *After the posting of this blog, the SBA extended the safe harbor deadline to May 14, 2020. To learn more, see our blog with this update.

Attorney Rebecca L. Simpson

Several days ago we posted a blog on the SBA’s announcement that it plans to closely scrutinize whether borrowers’ certifications of need were made in good faith, and if the certification was not made in good faith, the borrower is advised pay their PPP funds back by May 7, 2020.

The need certification had to be made by every borrower upon application for the PPP loan, and it reads: “Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”

SBA direction on the need certification applies to large and small companies

Though this direction from the SBA on the need certification came on the heels of attacks on the PPP for giving millions to large, publicly traded companies, the SBA has since made it clear that this direction applies to all borrowers, large and small.  According to the SBA, they will audit all PPP loans over $2 million, and all loans, no matter the size, are subject to being audited.

Anyone who is found to have not made the certification of need in good faith could be subject to criminal and civil penalties.

How can you show your need certification was made in good faith?

Unfortunately, it is not clear what evidence the SBA will require to prove your need certification was made in good faith.  The only direction that has been given is in the SBA’s FAQ document in the answer to question 31, which in relevant part reads:

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.  For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.

Borrowers should carefully consider based on their particular business, industry and circumstances whether their certification of need was made in good faith.  And, for those who have made a good faith certification, they should document the factors they considered in making that certification.

What is the safe harbor?

For any company that may not have made their certification of need in good faith, the safe harbor is included in the SBA’s Interim Final Rule posted on April 24, 2020, and reads:

Any borrower that applied for a PPP loan prior to the issuance of this regulation and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith.

That safe harbor expires this Thursday, May 7,2020.


The SBA continues to issue guidance on the PPP, and that guidance often comes after it is needed and sometimes changes the rules of the PPP in the middle of the game.  Finney Law Firm is keeping a close eye on new guidance and will continue to update you through our blog.  For questions, please contact Rebecca L. Simpson at 513.797.2856.



Attorney | ‭513-797-2856 | [email protected] | + posts