5/13/20: CONTINUED FEDERAL GUIDANCE ON ELIGIBITY AND CERTIFICATION
Whether you’ve received a loan under the Small Business Administration’s (SBA) Paycheck Protection Program (PPP), or you’re in the process of applying, we want to provide two important reminders:
On April 23, 2020, 20 days after applications could first be submitted for PPP loans, the Treasury and SBA provided their first guidance on the "need" issue in the form of Frequently Asked Question 31 (FAQ 31), which states:
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.
On April 28, 2020, the Treasury issued further guidance in FAQ 37, which confirmed that the guidance provided earlier in FAQ 31 applies equally to both publicly-traded and private companies.
Additionally, on April 28, Secretary of the Treasury Steven Mnuchin announced that the SBA would conduct a "full review" of every PPP loan of $2 million or more, in addition to other loans as appropriate, to determine whether the borrower met the requirements for participation in the program prior to loan forgiveness.
On May 13, the SBA issued FAQ 46 to provide additional clarity for borrowers regarding how the SBA will review borrowers’ required good-faith certification of the necessity of their loan request. You can review the full response by the SBA to FAQ 46 here.
Additionally, the SBA is extending the repayment date for the safe harbor to May 18, 2020, to give borrowers an opportunity to review and consider FAQ 46. Borrowers do not need to apply for this extension. This extension will be promptly implemented through a revision to the SBA’s interim final rule providing the safe harbor.
Please review the full and latest FAQ guidance. You will also want to familiarize yourself with the PPP statutory and regulatory provisions for all applicants and continue to monitor guidance from the SBA for future guidance.
Some borrowers have elected to repay their PPP loans or are planning to do so before the May 18 deadline as a result of these guidelines. If you have questions about the process, or if you have already received funding from First Horizon for a PPP loan and wish to repay your loan in full, please contact your banker as soon as possible for assistance.
Not intended as legal advice. Consult with your legal advisor if you have additional questions.