Certifying Need and Eligibility for the PPP — New Guidance Released

Certifying Need and Eligibility for the PPP — New Guidance Released

Presented by Aldrich CPAs + Advisors

As of May 18, 2020, the PPP Loan Forgiveness Application is now available on the SBA site. Apply here.

Important new guidance from the US Treasury was recently released around eligibility for the Paycheck Protection Program (PPP) loans. The newly updated FAQ now establishes that applicants must be able to demonstrate a need for financial assistance or limited access to other liquidity.

Below, we’ve outlined a few of the highlights from the newly updated PPP FAQ. You can find the full document here and the Small Business Administration’s final interim rules here.

PPP Eligibility Limited by Access to Other Liquidity

Question 31 on the FAQ asks, “Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?”

Beyond reviewing other guidelines to determine eligibility, borrowers should note that they must certify in good faith that the PPP loan is necessary. Borrowers should consider their current business activity and access to sources of liquidity. The FAQ also mentions that public companies probably cannot make that certification in good faith and should expect to demonstrate the necessity of the PPP loan to the SBA upon request. This example, however, extends to all companies and not exclusively public organizations.

Implications and Additional Guidance

For borrowers that have received their PPP funds but no longer feel that they can fulfill certification, they should consider repaying the loans by May 18, 2020. Those that applied for the loan after April 23, 2020 with other sources of liquidity could be considered to have not made the certification in good faith.

The Treasury also said in a new FAQ that if a PPP loan is paid back by the May 14th deadline, the employer will be re-eligible for the Employer Retention Credit if it meets the rest of the eligibility requirements for such credit.

The consequences and implications are still unknown at this point, though it is expected it will affect forgiveness. Definitions of large businesses and significant detriment to business have not yet been provided. At this time, much of the details around certifying in good faith are vague.

If you have questions about your PPP loan application or are concerned you may need to repay the funds, please reach out to your Aldrich Advisor today.

This article was written with the best available information as of May 7, 2020. Continue to check back as we update the article with new guidance and information.

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