Originally published on Forbes.com.
The PPP Frenzy
The Paycheck Protection Program created something of a frenzy. A low-interest loan with generous terms that you don’t have to pay back if you spend it making payroll and paying bills you need to pay anyway. What’s not to like? Well there was that certification.
I did not think the certification was any sort of an issue for anybody in my fairly wide circle of acquaintance. As I put it on March 28:
“The other thing you have to certify is that “uncertainty of current economic conditions makes necessary the loan request” to support your ongoing operations. So if you have the whole COVID-19 situation figured out so you are perfectly sure how you will get through the crisis without borrowing any money, you don’t qualify. And everybody else in the country wants to be you.”
Examine Your Conscience?
Besides keeping you my beloved readers up to date, I was calling my favorite not-for-profits, friends and family. As I related here my friend Daryl Carter ended up passing when he studied the certification.
“In advance, I figured that the wealthy who had CPA’s, tax advisors, banking relationships, and are organized would be first in and would obtain a good chunk of the money intended for those who really needed it.Anticipating that is why I decided not to take the money even though I had all of the paperwork ready to send.”
As it turned out a number of companies found themselves embarrassed by taking the money and SBA and Treasury have been encouraging them to pay it back – Silly public companies, those loans are for Main Street. Of course that has other people nervous. I’m wondering if parochial grammar school graduates predominate – examining their consciences to see if any of their thoughts were impure when they signed the certification.
No Harm No Foul
Well just about everybody can rest easy now as a new item has been added to the FAQ, which is where SBA and Treasury tell us the rules.
FAQ 46 tells us that any borrower who along with affiliates received less than $2 million will be considered to have certified in good faiths, any impure thoughts they had to the contrary notwithstanding.
For the over $2 million crowd the news might be even better. I won’t paraphrase this one:
“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.”
Basically nobody who had an actual business and did not blatantly lie on the application will have cause to regret having chased PPP money. Given the speed which the program was thrown together and the vagueness of the certification, this is clearly the right answer.
If there was an attempt to penalize companies because they were being piggy in applying, litigation would have dragged on for years. I might have found it entertaining, but no good would have come of it.