SBA warns that larger companies may not qualify for PPP loans
The U.S. Small Business Administration (SBA) issued guidance Thursday reminding larger companies with adequate sources of liquidity to support ongoing operations of their responsibility to certify their eligibility for Paycheck Protection Program (PPP) loans if they apply or have applied.
The SBA also issued guidance Friday in an interim final rule related to the PPP addressing promissory notes, authorizations, affiliation, and eligibility.
An example in Thursday’s guidance stated that a public company with “substantial market value and access to capital markets” should be prepared to demonstrate to the SBA the basis for its economic need certification. The guidance does not further define “substantial market value.”
The guidance sets a May 7 deadline for borrowers to repay PPP funds if they can’t certify in good faith that current economic uncertainty makes the PPP loan request necessary to support ongoing operations. The guidance is presented in an update to the SBA’s Q&As related to the PPP.
In guidance added to its Q&A document, the SBA explained that all borrowers must assess their economic need for a PPP loan under the standard established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136.
Some larger companies, both public and private (such as Shake Shack and Sweetgreen), already have announced that they will be returning their PPP loans.
According to the guidance, PPP borrowers must make the good-faith certification while taking into account their current business activity and ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.
Lenders, on the other hand, may rely on a borrower’s certification regarding the necessity of the loan request, according to the guidance.
The interim final rule addressed other issues related to the PPP, including:
PPP loans are available to small businesses that were in operation on Feb. 15 with 500 or fewer employees, including not-for-profits, veterans’ organizations, Tribal concerns, self-employed individuals, sole proprietorships, and independent contractors. Businesses with more than 500 employees in certain industries also can apply for loans, according to the SBA and Treasury.
The initial $349 billion set aside for PPP loans was exhausted in just 12 days, but Congress this week approved a $310 billion replenishment of the PPP program. President Donald Trump signed the legislation Friday.
The AICPA’s Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.
For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA’s coronavirus resources page or subscribe to our email alerts for breaking PPP news.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.
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