SBA Updates PPP Guidance on “Current Economic Uncertainty” CertificationOn April 23, 2020, the Small Business Administration (SBA) updated its Answers to Frequently Asked Questions about the Paycheck Protection Program (PPP). Among the most noteworthy updates is the following answer provided by the SBA about the so-called “current economic uncertainty” certification that PPP borrowers are required to make:

Question: Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?

Answer: In addition to reviewing applicable affiliation rules to determine eligibility, all borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application. Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers still must certify in good faith that their PPP loan request is necessary. Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers 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. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.

Lenders may rely on a borrower’s certification regarding the necessity of the loan request. Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith.

Bradley will continue to monitor and report on the SBA’s evolving PPP guidance.

If you have any questions about the PPP or any related issues, please feel free to contact Aron Beezley, Frederic Smith, or Elizabeth Boone.

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Photo of Aron C. Beezley Aron C. Beezley

Aron Beezley is the co-leader of Bradley’s Government Contracts Practice Group. Ranked nationally in Government Contracts Law by Chambers in 2019-2020, named one of the “Top Attorneys Under 40” nationwide in Government Contracts Law by Law360 in 2016-2017, and listed in Washington, D.C.

Aron Beezley is the co-leader of Bradley’s Government Contracts Practice Group. Ranked nationally in Government Contracts Law by Chambers in 2019-2020, named one of the “Top Attorneys Under 40” nationwide in Government Contracts Law by Law360 in 2016-2017, and listed in Washington, D.C. Super Lawyers as a “Rising Star” in Government Contracts Law in 2014-2020, Aron’s vast experience includes representation of government contractors in a variety of industries and in all aspects of the government-contracting process, including negotiation, award, performance and termination.

Photo of Frederic L. Smith Jr. Frederic L. Smith Jr.

Frederic Smith has nearly 20 years of experience representing businesses in M&A transactions, contract negotiations, joint venture transactions and financing transactions. In addition to his transactional practice, Frederic serves as outside general counsel to several privately held and family-owned businesses. View articles by Frederic

Photo of Elizabeth M. Boone Elizabeth M. Boone

Elizabeth Boone

Elizabeth advises clients on business transactions and compliance matters domestically and internationally, including contract negotiation, establishment and maintenance of legal entities, establishment of terms and conditions for the sale of goods, privacy compliance matters, employment matters and real estate transactions. She…

Elizabeth Boone

Elizabeth advises clients on business transactions and compliance matters domestically and internationally, including contract negotiation, establishment and maintenance of legal entities, establishment of terms and conditions for the sale of goods, privacy compliance matters, employment matters and real estate transactions. She regularly assists clients with ensuring compliance with GDPR, EU ePrivacy Directive (cookie law), CCPA, and other state-specific privacy laws.