FAQ 46 Certification Rule Clarity

May 13, 2020

Subsequent to the publishing of this item, the Treasury/SBA released FAQ 47 which further extends the below discussed certification’s safe harbor to May 18, 2020 here.

May 13, 2020

On Friday, April 24, 2020, the Small Business Administration (SBA) published an Interim Final Rule relating to the Paycheck Protection Program (PPP). This item summarized a safe harbor provision for those who misunderstood or misinterpreted the now infamous second certification (“current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”) of the Paycheck Protection Program loan application. The Treasury and SBA also released FAQs 31, 37, 39, and 43 related to this item and extended the safe harbor to May 14, 2020 which we wrote on here. Today, the Treasury released the long awaited and promised further guidance on this certification question as item 46. A link to the FAQs may be found here.

Key Provisions or Clarifications in the FAQ 46

We will focus only on those items we regard as new, clarified, and key for our clients and in no way does the below purport to be an exhaustive list. The items below are those considered to have ‘changed’ or become ‘clarified’ as part of this updated FAQ. The SBA has reduced the paperwork burden on borrowers who have borrowed less than $2 million through the PPP. Essentially, the act of borrowing the funds from the PPP will be assumed to be made in good faith. Specific wording can be found below:

  • Borrowers, together with affiliates, who obtained a loan below $2 million will be deemed to have made the certification in good faith for purposes of the PPP program administration.
  • As previously discussed, those loans in excess of $2 million, and others as deemed appropriate, will be reviewed by the SBA in evaluating the necessity of the loan requests.
  • If the SBA finds that the basis for receiving the loan is lacking, the SBA will seek repayment of the loan balance and inform the lender of the borrower’s ineligibility for forgiveness. If the borrower repays the loan after given notice, no further action will be pursued against the borrower.
  • For lenders, the SBA’s determination of whether the certification was adequately met in no way will affect the SBA’s guarantee of the loan.

It is suspected the remaining funds from the second round of the PPP funds will run out quickly with this new guidance.

Our Management Consulting team is willing and eager to assist you by advising on documentation best practices, modifying your chart of accounts and calculating initial projections.  We can be reached at: consulting@khaaccountants.com.

As you are planning over this critical eight-week period, we strongly encourage you to request our assistance. These calculations for potential loan forgiveness amounts are complex and items will be worked on a first come first served basis, upon receipt of an executed engagement letter and requested items.

As your trusted advisors, we are committed to keeping you well-informed with any new legislation passed by Congress or other authorities as well as any new pronouncements by the Department of Treasury that may affect you. Please do not hesitate to reach out to KHA with any additional questions you may have.  

These sources are simply included for informational purposes. KHA Accountants, PLLC, its partners and others do not provide any assurance as to the accuracy of these items or the information included therein. As such, KHA Accountants, PLLC cannot be held liable for any information derived from referenced sources. This by no means is a recommendation to obtain a loan or attempt to apply for a loan. There are many unknowns at this time regarding what other stimulus (grants or other loan options) that may become available with pending and future bills, executive orders, or emergency declarations to follow, that may become laws. Consult your legal and business advisors prior to making financing decisions. This is intended for illustrative and discussion purposes only.

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