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Revised Guidance on PPP Good-Faith Necessity Certification

On May 13, 2020, the U.S. Department of the Treasury (Treasury) published a much-anticipated FAQ #46 regarding how the SBA will review the required good-faith certification for PPP loan requests.

FAQ #46 in its original form can be found here. Treasury continues to differentiate between PPP loans above and below $2 million. The full text of FAQ #46 is provided below.

A few key highlights include:

  • Borrowers of PPP loans of less than $2 million will be deemed to have made the necessity certification in good faith helping promote economic certainty. The SBA does not appear to be seeking further review of these loans.
  • Borrowers of PPP loans of more than $2 million may still satisfy the good-faith certification based on individual circumstances. The SBA will continue to review loans more than $2 million.
  • If the SBA determines that borrowers of PPP loans of more than $2 million lacked an adequate basis for the loan request, the SBA will seek repayment from the borrower. If the borrower repays the loan, the SBA will not pursue enforcement or referrals to other agencies.

46. Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?

Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: 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.

SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.

Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.

If you have any questions, please reach out to our team at covid19@macpas.com and visit our COVID-19 Resource Center at macpas.com/covid-19 for further updates on all COVID-19 related business matters.

Questions on submitting your PPP loan application or the forgiveness process?

Our team stands ready to assist you through the PPP loan application and forgiveness process. Do not go at it alone. Ensure you are submitting the right information and receiving the highest forgiveness amount possible. Visit our PPP Loan Consulting webpage by clicking here to request assistance or support.


This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although McKonly & Asbury has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.

About the Author

Dan Sturm

Dan is a Partner and the Director of our Architecture, Engineering, and Construction (AEC) Practice, serving clients across the Mid-Atlantic. His industry focus includes construction, employee benefit plans, federal acquisition r… Read more

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