Apr 28 Additional PPP Certification Requirements
In a continuing effort to clarify the questions and uncertainties surrounding the Payroll Protection Program (PPP), the SBA issued another set of FAQs on Thursday, April 23, 2020.
We specifically point your attention to FAQ #31, which augments the existing borrower good faith certification that is required as part of the application process. While borrowers still must certify that “current economic conditions make necessary the loan request to support the ongoing operations”, there is a recently added layer that also entails consideration.
New and existing applicants, as well as borrowers who have already received PPP funding, must “take current business activity into account” when determining if PPP funding is needed. Furthermore, a borrower’s “ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business” must be analyzed.
Borrowers have until May 7, 2020 to take these standards into account when confirming PPP eligibility. Borrowers may return the funds by this date to avoid certification issues.
Each borrower should consider the impact of this newly issued clause and document the reason(s) to support PPP eligibility. Examples include, but are not limited to:
- Do you have access to capital outside the PPP (i.e., line of credit, significant cash reserves, other capital resources)?
- Is your business open? If yes, are you operating with a reduced staff?
- Did you have a decline in current sales and/or a cancellation of future orders?
- Have your receivable collections decreased and/or have your customers requested more favorable payment terms?
- Any supply chain issues (i.e., diminished access to product or materials, inability to deliver product, reduced access to labor market)?
- Are your customers/vendors applying for PPP funding?
We encourage all businesses who have applied or plan to apply for the PPP loan to document their rationale as to why the loan is necessary to support ongoing operations. Preparation of a 30/60/90 day cash flow analysis taking into account loss of income, slowdown of receivable collections, lack of currently available credit facilities, potential employee layoffs or furloughs, debt repayments, projected expenses and other cash disbursement commitments would be one example to demonstrate that the PPP loan is needed to support ongoing operations.
Sax will continue to update you as further details are made available. Reach out to your Sax advisor or email [email protected] with questions. For more and on-going information relative to your state and business, visit Sax’s COVID-19 Resource Center.