Financial Support for Small and Medium Businesses - The Main Street Lending Program
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SBA Clarifies Review of PPP Good-Faith Certification Requirements - COVID-19 Legislation

May 2020


On May 13, 2020, the Small Business Association (“SBA”) updated its list of Paycheck Protection Loan FAQs to provide guidance on the SBA's review of the good-faith certification required by borrowers on PPP applications concerning the necessity of their loan request.

Per SBA guidance, "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.” Previously, the SBA stated it would automatically review all PPP loans in excess of $2 million when a lender submits a business’s application for forgiveness, and reserved the right to audit other PPP loans as appropriate. 

The May 13 guidance creates the following safe harbor for borrowers with PPP loans under $2 million: "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."

Further, the SBA addressed penalties for improperly made good-faith certifications.  If the SBA determines a borrower lacked an adequate basis for making the required certification on its PPP application, 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."

If a borrower repays its loan after receiving such a notification from the SBA, the SBA will not pursue administrative enforcement or make referrals to other agencies.

If you have any questions related to this legislation, please contact your attorney at Pedersen & Houpt or the attorneys below and we will answer your questions and walk you through the program.

Larry Byrne  
Attorney at Law
161 North Clark Street, Suite 2700
Chicago, Illinois 60601
312-261-2155
lbyrne@pedersenhoupt.com

Eric J. Kordish
Attorney at Law
161 North Clark Street, Suite 2700
Chicago, Illinois 60601
312-261-2249
ekordish@pedersenhoupt.com

Matthew J. Schmidt
Attorney at Law
161 North Clark Street, Suite 2700
Chicago, Illinois 60601
312-261-2281
mschmidt@pedersenhoupt.com

David A. Martin
Attorney at Law
161 North Clark Street, Suite 2700
Chicago, Illinois 60601
312-261-2286
dmartin@pedersenhoupt.com