NEWS FLASH: The SBA will consider any Payroll Protection Program loans issued for less than $2 million by definition to have been made in good faith. This new rule was issued MAY 13, 2020.
This is a HUGE win for small businesses!
Why is that an issue?
When submitting a PPP application, solo and small firm borrowers must certify that “current economic uncertainty makes this loan request necessary to support their ongoing operations.” This raised a lot of question and concerns for my clients because the penalties can be severe.
What does “necessary” mean?
What if you thought the funds would be needed … but then didn’t?
What if the SBA disagrees with your evaluation of “necessary”?
The penalties can mean $250K in fines and serious jail time for false statements.
BUT NOW, it will be assumed that if you got a loan for less than $2 million – you truly needed it. The SBA will not be auditing those smaller loans to determine if they met the “necessary” requirement.
In this short video, I share three significant reasons the SBA is taking this approach.
- They recognize small businesses have less access to capital
- They want to promote economic certainty
- The need to conserve audit resources
Here’s a link to the most recent update of SBA’s FAQs regarding the PPP:
These evolve with time, so keeps your eyes open for updates!
And keep track of how you’re spending the funds. Those requirements have not yet changed.