The FNB Blog

SBA Paycheck Protection Program Certification
Tuesday, May 5, 2020 / Categories: COVID-19 Updates

SBA Paycheck Protection Program Certification

"no questions asked" deadline is May 7, 2020

The SBA has now added a significant test to the Paycheck Protection Program for determining borrower eligibility in addition to the initial test of whether an applicant could certify the need for funding due to economic uncertainty. Now, the SBA is saying that borrowers and would-be borrowers are also required to evaluate their funding alternatives. While the SBA did not reinstate the “Credit Elsewhere” test from traditional 7(a) small business loans, the SBA has stated they will begin to scrutinize borrower’s liquidity alternatives to raising funding.

We expect that the SBA will seek to apply this new test to existing loans under the Paycheck Protection Program as well as new applications. Borrowers should carefully evaluate and be comfortable making the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant” after taking into account current business activity and ability to access other sources of liquidity sufficient to support ongoing operations. Otherwise, the SBA may seek to determine that you are not eligible and should return the funds. 

The SBA has established a relatively short “no questions asked” deadline to return funds without subjecting borrowers to any liability. This change creates a limited safe harbor for any applicants that repay the loan in full by May 7, 2020 – borrowers who do so will be deemed to have made the economic uncertainty certification in good faith. Of course, we cannot make such a determination for a customer. Each borrower will have the sole responsibility for its decision.

If you should feel that you wish to pay back the loan in full in order to avail yourself of the new safe harbor based on this new requirement or if you have questions regarding the change, please contact us as soon as possible.[1] In the case that you feel comfortable making the certification, make sure and document your circumstances as you see them at the time of the application.

In the event you elect to return your funds, please note that there may be other funding and loan options available. We are available to discuss options for supporting your business during these challenging times.

 

[1] Please note that interest will be due for any amounts that have been outstanding.

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