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Today, the SBA issued a HUGE clarification on the definition of "necessary."
Hey all,

As many of you know, there have been some serious questions surrounding the Paycheck Protection Program definition of "necessary." Today, the SBA issued a HUGE clarification:

Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith. SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees.

In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns. Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. 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. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.

Although this clears up the big question, if you feel that the PPP loan is not necessary for your business, the deadline to return the funds is by the end of the day tomorrow. You will need to consult with your lender if this is the case.

In an effort to keep things consistent and timely, it’s likely that if you reach out you’ll be getting a response from one of my team members. Don’t worry-I’m not going anywhere. I just trust my team to get you what you need especially during this time. :-)

Thanks again!

Tim
 
 
 

Tim Petrey, CPA, CGMA
Managing Partner
HD Davis CPAs,LLC
330.759.8522 ext. 103









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