The Small Business Administration issued an FAQ last week clarifying the process that allows applicants to certify their Paycheck Protection Program loans are in fact needed to support the ongoing business operations caused by the ongoing economic uncertainty due to COVID-19.
The key takeaway is that for loans of less than $2 million, borrowers will not be asked to take formal action and will instead be considered to have made the loan request in good faith. According to the FAQ, no additional review or documentation is required at this time.
For those who took out PPP loans of more than $2 million, the SBA clarified that these loans will be specifically reviewed by the administration to ensure the loan was spent in compliance with previously stated rules (at least 75% used to maintain payroll, limits on executive salaries, etc.)
If the SBA finds a loan request was not made in good faith, the loan will not be eligible for forgiveness. However, the borrower will then have the opportunity to repay the amount in full and avoid future administrative enforcement.