SBA FAQ Indicates Good Faith Assumed for PPP Loans Under $2M

In a dramatic turn of events the Small Business Administration (SBA) released Paycheck Protection Program (PPP) Loans FAQ #46 today, May 13th regarding how the organization will review borrowers’ required good-fair certification concerning the necessity of their loan request.

Loans Under $2 Million

The FAQ reads “Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.”

This new FAQ is significant as it indicates an actual threshold at which the SBA will assume there is economic need. The SBA goes on to describe their rationale, that borrowers with loans less than that $2 million are less likely to have access to adequate funding sources, and that this will enable the SBA to conserve its finite audit resources and focus its reviews on larger loans.

This is an indication that the SBA’s goal is to align as closely as possible with Congress’s intent to provide the PPP funds to small businesses in need.

Loans Over $2 Million

This FAQ again emphasizes the intent of the PPP, indicating the funds are to be used to retain and rehire employees. Organizations applying for loans over $2 million may still have an adequate basis for making the required good-faith certification, and the SBA will review these based on individual facts & circumstances.

If the SBA determines in the course of its review that a borrower lacked adequate basis for the required certification concerning the necessity of the loan request, the SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. Further, if the borrower repays the loan after receiving notification from the SBA, the SBA will not pursue administrative enforcement or referrals to other agencies based on its determination.

In a previous post, AAFCPAs provided sample questions borrowers should address in a written “living document” supporting that PPP loan certifications were made in good faith. We advise clients to review their certification and ensure you are comfortable signing the loan application.

Read the PPP FAQs here. >>

If you have any questions, please contact Dan Stanhope, CPA, at 774.512.4134,; or your AAFCPAs Partner.

About the Author

Dan leads high-energy engagement teams in providing assurance solutions to clients across a wide variety of privately-held, commercial industries, including: Construction, Cannabis, Manufacturing & Distribution, Professional Services, Architecture & Engineering, and Insurance. He offers detailed reports about audit findings and communicates business-critical information to management, positively impacting their decision making.