A joint statement by Secretary Steven Mnuchin and Administrator Jovita Carranza on the review procedure for the PPP loans was released April 28th. As a part of the joint statement, it was expressed that a large number of companies have reevaluated their need for the PPP loans and promptly repaid loan funds in response to SBA guidance reminding borrowers of the important certification required to obtain a PPP loan. To ensure that the PPP loans are limited to eligible borrowers, the SBA has decided, in consultation with the Department of the Treasury, that it will review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the borrower’s loan forgiveness application.
As a reminder, the PPP application requires a borrower to certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” According to SBA FAQs sent April 23rd, Q & A #31 states that a borrower must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. In addition, any borrower that applied for a PPP loan prior to the issuance of Q & A #31 and repays the loan in full by May 7, 2020, is deemed by the SBA to have made the required certification in good faith.
Incorporating documentation into the corporate minutes with a discussion of your area’s economic uncertainty and the dealership’s conditions supporting the need for the loan request is a consideration for any borrower.
The SBA’s Fifth Interim Final Rule provides that a borrower cannot take multiple draws from a PPP loan to try to delay the start of the 8-week covered period. The lender must make a one-time, full disbursement of the PPP loan within 10 calendar days of the loan approval. A loan is considered approved when the loan is assigned a loan number by the SBA [if the 10th calendar day is a Saturday, Sunday, or a legal holiday, the period continues to run until the end of the next business day]. A loan that received an SBA loan number prior to the posting of the Fifth Interim Final Rule but has not yet been fully disbursed, the following applies:
• The ten calendar-day period described above begins on April 28, 2020.
• The 8-week covered period began on the date of first disbursement.
The interim rule also provides that if a borrower has not submitted the required loan documentation within 20 calendar days of loan approval, the lender will cancel the loan.