The SBA issued an update to its previously-issued guidelines regarding Payroll Protection Loans. As in the past, the update has remained in the form of FAQs. In the latest version there is significant additional information regarding the certification requirement imposed on borrowers. Borrowers were required to certify in the PPP application that the PPP loan is necessary due to “economic uncertainty”. BMSA recommends to those who have received their PPP loan proceeds and those who are awaiting funding of a PPP loan, that you review the answer to questions 31 and 37 in the link below outlining the updated guidance, and make sure that the certification previously made regarding “economic uncertainty” remains accurate. The guidance allows for a return of the PPP loan proceeds by May 7, 2020 in the event that the certification is no longer accurate. Returning the proceeds will be viewed as being within the definition of “good faith”.
Also please note that the Secretary of the Treasury recently announced that any borrower receiving more than $2 million in a PPP loan will be audited regarding the use of the loan proceeds and the validity of the certification made in the PPP loan application. Although there is no information in the updated SBA guidelines regarding the scope of the audit, it is wise to keep accurate records regarding use of the PPP loan funds, anticipating that an audit will likely occur if you borrowed more than $2 million. Even if you borrowed less than $2 million, keeping accurate records of how the PPP loan proceeds were spent is encouraged to support the application for forgiveness of the PPP loan. The SBA is expected to update the guidelines from time to time providing more definition to the “forgiveness” aspect of the PPP loans. BMSA will provide updates as that information becomes available.
Should you have questions on the PPP loan program, please contact one of the attorneys in the Business Practice Group.
Click the button below for the download of the Fact Sheet.