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SBA Provides Key PPP Loan Clarifications

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On May 5, 2020, the Small Business Administration (SBA) added FAQ 43 to its Paycheck Protection Program Loans Frequently Asked Questions (FAQs) document, clarifying the timeframe for loan good faith certification.

The key takeaways from FAQ 43 are:

  • If organizations return Paycheck Protection Program (PPP) loan funds by May 14, 2020, the SBA will deem the loan application to have been filed in good faith. This is an extension from the May 7 date the SBA previously provided.
  • The SBA intends to issue guidance before May 14 regarding how it will review the certification (presumably during its “audits” of forgiveness applications).

As we previously reported, U.S. Treasury Secretary Steven Mnuchin has announced that the SBA will perform a “full audit” of the loan applications of all recipients of PPP loans of more than $2 million.

Here is the full text of FAQ 43:

Question: FAQ #31 reminded borrowers to review carefully the required certification on the Borrower Application Form that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA guidance and regulations provide that any borrower who applied for a PPP loan prior to April 24, 2020 and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith. Is it possible for a borrower to obtain an extension of the May 7, 2020 repayment date?

Answer: SBA is extending the repayment date for this safe harbor to May 14, 2020. Borrowers do not need to apply for this extension. This extension will be promptly implemented through a revision to the SBA’s interim final rule providing the safe harbor. SBA intends to provide additional guidance on how it will review the certification prior to May 14, 2020.

This article provides a framework for analyzing the PPP loan good faith certification requirement and how your organization can assess and document your decision to sign off on the certification during the loan application process.

PPP Loans Not Subject to Uniform Guidance Compliance Audits

Many of our nonprofit clients have been asking whether PPP loan proceeds are subject to the Uniform Guidance single audit requirements.

The SBA has informed the American Institute of Certified Public Accountants (AICPA) that PPP loans made to nonprofit organizations will not be subject to the Uniform Guidance single audit requirements.

However, the SBA also informed the AICPA that Economic Injury Disaster Loans (EIDLs) made to nonprofits are considered a direct loan from the SBA to the loan recipient. As a result, EIDLs are considered federal financial assistance and are subject to single audit requirements. The threshold for a single audit is $750,000 or more in total federal financial assistance in a nonprofit’s fiscal year.

Note that while we deem this information reliable, we are still waiting for this guidance to be published by the SBA or the Office of Management and Budget in public form.

Additional Resources

During this time of rapid change, we encourage you to visit the COVID-19 Resources section of our website often for the latest updates and resources.

You can also contact us online or at info@capincrouse.com with any questions.

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