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April 27, 2020

Additional Stimulus and Changes to SBA FAQ Amid Concerns Over “Need” for PPP loans

Posted by COVID-19 Rapid Response Team

On Friday April 24, 2020, President Trump signed legislation providing an additional $310 billion in funding for the Paycheck Protection Program (PPP), $60 billion of which is reserved for community banks and small lenders; $75 billion for hospitals; $25 billion to support testing efforts; and $60 billion for emergency disaster loans and grants.

This announcement comes in the wake of widespread concerns regarding for profit and non-profit entities who have already received PPP funding that were struggling due to the coronavirus. There are concerns that access to the forgivable loans has not been limited to those who truly need it.

The Treasury Department updated its FAQ’s to add item 31, which addresses businesses owned by large companies with adequate sources of liquidity to support the business’ ongoing operations should not qualify for a PPP loan. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.

The Treasury Department’s response to address this question was to indicate that in addition to reviewing applicable affiliation rules to determine eligibility, all borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application. The Treasury Department response also indicated that any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith.

In light of this new FAQ and response from the Treasury Department, Armanino recommends all recipients of PPP funding re-evaluate their initial decision process regarding their need for PPP loans.

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