Good News on Good Faith Certification for Small Businesses
After much back-and-forth and a lot of confusion within the SBA and between the SBA, Department of the Treasury and Congress, we are very pleased to report that the most recent guidance, issued yesterday by Treasury, clarifies and simplifies the process for confirming that the PPP loan was issued appropriately under ‘good faith’ certification.
In summary, any entity or entity plus its affiliates, which receives a total less than $2 million in PPP principal loan proceeds, will be able to rely purely on the good faith certification made in the loan request alone to ensure compliance.
What this does is it ensures that small businesses do not have to worry that the SBA or Treasury might determine in the future that their loan did not meet the intentions of the CARES Act. As you know, many larger companies are being asked to return their loans and there is a fierce debate about what the program should and should not be funding. Unfortunately, that has resulted in a lot of fear and concern among borrowers about whether they will be at risk. This clarification resolves that concern in a positive and decisive manner for small business owners.
The Treasury department’s basis for this guidance is that borrowers with loans below the $2 million threshold will be assumed to have “not had access to adequate sources of liquidity” than borrowers who obtained larger loans.
It should also be noted that entities who received loans at or greater than $2 million can still have an adequate basis for executing the good-faith certification. However, for those under that threshold, SBA will assume this is the case.
As always, if you have any questions, please contact us and we will be more than happy to assist you through this process.
Matt Brady, CPA
Image Credit: Omar Salvatierra Gracida (Flickr @ Creative Commons)