SBA Releases Additional Guidance, Including Repayment Option for Companies Not Eligible for PPP

FAQ ( frequently asked questions ) text on notebook with many light bulbsOn April 23rd, the Small Business Administration (SBA) released additional guidance regarding the Paycheck Protection Program (PPP) under the CARES Act. FAQ #31 of this guidance addresses the question of whether businesses owned by large companies with adequate liquidity qualify for the PPP program and provides an option to repay the loan without penalty.

When applying, companies must certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” The FAQ 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.”

The FAQ provides an example of a public company with substantial market value and access to capital markets where it would be unlikely that the company could make the required certification in good faith and states that “such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.”  It goes on to say, “Lenders may rely on a borrower’s certification regarding the necessity of the loan request.  Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020, will be deemed by SBA to have made the required certification in good faith.”

The timing of this guidance coincides with the passing of an additional $484 billion in CARES Act stimulus, with $310 billion allocated to the PPP program. We anticipate that funds will be disbursed quickly and encourage qualifying businesses to apply as soon as possible through your banking relationship.

For more information about the PPP program and best practices for debt forgiveness, please visit our COVID-19 Updates & Resources page. As always, feel free to reach out to the ML&R team with any questions.

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