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You affirm that the tax documents are identical to those you submitted to the IRS. On April 24, 2020, President Trump signed into law the Paycheck Protection Program and Health Care Enhancement Act, whose provisions we summarized here. If they do so, they will satisfy the “good faith” certification requirement. We recommend that you obtain separate legal advice. We are proactively monitoring any forthcoming regulations and guidance. Document types required for a PPP application depend on the type of … The Paycheck Protection Program (PPP) is a loan designed to provide a direct incentive for small businesses to keep their workers on payroll. You should keep the PPP money. Alert The performance requirements, and especially the target levels, should be “challenging but achievable” for a good or high standard operator. For one thing, you probably need the money. One of the agencies’ primary mechanisms for conveying these requirements to borrowers has been through a regularly updated list of Frequently Asked Questions, many of which the SBA then formalizes through interim final rules that it publishes in the Federal Register. The PPP program requires all borrowers to certify that “current economic uncertainty makes this PPP loan request necessary to support the ongoing operations of the Applicant.” You should be able to show that the loans helped to cover immediate losses, business disruption, avoid employee layoffs, avert uncertainty around consumers or suppliers, etc. Preparing these requirements is a very demanding task. The CARES Act provides $350 billion for small business Paycheck Protection Loans and an additional $10 billion for the existing Economic Injury Disaster Loan program. (More on this in a minute.) There are four key takeaways from this new guidance: Pillsbury attorneys are assisting clients interpret and assess the new PPP requirements. 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. Remember that there is no pre-payment penalty if you elect to pay your loan back early, but it is also ok to hold onto the loan for up to two years (assuming you were eligible to participate in the PPP program). The government needs to be conscious of the risk of setting overly ambitious targets that may become unrealistic and unachievable, putting at risk the financial sustainability of the project contract and even its commercial acceptability. Additional PPP Certification Requirements. These and any accompanying materials are not legal advice, are not a complete summary of the subject matter, and are subject to the terms of use found at: https://www.pillsburylaw.com/en/terms-of-use.html. The necessity certification in the PPP loan application requires an authorized representative of the applicant to certify “ [c]urrent economic uncertainty makes this loan necessary to support the ongoing operations of the Applicant.” Question: Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan? In summary, the full business case needs to demonstrate the following aspects of a project, among other issues. The new guidance suggests that publicly traded companies, in particular, will have to carefully consider their alternate sources of liquidity. 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. But let’s review, one more time, the official guidance. Recent statements by the Small Business Administration have confused many Paycheck Protection Program (PPP) borrowers. FAQ for borrowers and lenders participating in the Paycheck Protection Program Now including predictive, agile and hybrid approaches, the PMP ® proves project leadership experience and expertise in any way of working. grant to the bidders sufficient time for proper due diligence and analysis/assessment of the project and the contract from different In Victoria, agencies seeking approval to implement a PPP project need to develop a full business case that addresses several aspects of the project. 03.27.20. 04.24.20. The enabling statute requires that a PPP loan applicant certify, in good faith, that “the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient.” These sections require the Accounting Authority to have an appropriate procurement and provisioning system in line with the constitutional principles that is fair, equitable, transparent, competitive, and cost-effective. Worried about your PPP certification? You will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after getting this loan. On May 13, 2020, the U.S. Department of Treasury and the Small Business Administration (SBA) issued a new FAQ revising its previous guidance surrounding the borrower certification requirements for the CARES Act's Paycheck Protection Program, which had created substantial uncertainty for PPP loan applicants and recipients. Alert The new guidance addresses the required certification that a PPP loan is necessary to support the applicant’s operations. 11 min. Additional PPP requirements by entity type Independent contractors. Knowingly making a false statement to get a loan under this program is punishable by law. If you continue to use this site we will assume that you are happy with it. What Certification is Required By the CARES Act? One such certification that has drawn particular scrutiny is the certification that the “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Many applicants have noted that this certification is vague and have sought guidance on it. 04.20.20. 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. PPP applicants are required to make a number of certifications in connection with their applications, for example concerning their eligibility and the purposes for which they will use the loans. 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. A borrower who applied for the PPP loan before April 23 and repays the loan in full before May 7, 2020 will avoid any potential liability. Attention to these certifications is extremely important, given the severe penalties that are possible for submitting false or misleading certifications to the government. Alert certification means the borrower has no more than 300 employees, after applying the affiliation rules, if applicable, and the borrower meets the other eligibility requirements in subsection (c) of the interim final rule for Second Draw PPP Loans. One of them is “solution deliverability”. Terms of Use, PPP Certification Criteria: 3 Questions for Every Business, How to demonstrate good faith with PPP loan certifications. 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. On April 23, 2020, SBA and Treasury added the following new FAQ concerning this certification, reproduced below in full: 31. Loan amounts can be forgiven if they are used for payroll costs, rent, mortgage interest, and other specified expenses during the eight weeks following receipt of the loan. You have not and will not receive another loan under this program. As the PPP has evolved since its inception on March 27, so too have SBA and the U.S. Department of Treasury’s articulation of its requirements. 04.20.20, © 2001–2021 Pillsbury Winthrop Shaw Pittman LLP. And you also understand, acknowledge, and agree that the lender can share the tax information with the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews. To no one’s surprise given the press around the first wave of the loans, the SBA ratcheted up the certification requirements for these loans. 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. CARB-Accredited LCFS Verification and Validation, California Businesses Get Answers on PPP Deductibility: Summary of Assembly Bill 80, Summary of Proposed American Families Plan. In light of the requirement’s retroactivity, the SBA has announced a safe harbor until May 7, 2020, for borrowers to return loans if any of the SBA’s subsequent guidance has changed the validity of their application certifications. On April 23, 2020, the Department of the Treasury (“Treasury”) and the Small Business Administration added FAQ 31 to the Frequently Asked Questions (“FAQs”) on Paycheck Protection Program (“PPP”) loans. On April 28, the SBA announced that it would review all PPP loans over $2 million to make… The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments. The PPP loan application contains a number of eligibility requirements and borrower certifications. Your Tax Planning Checklist: Are You Well Positioned for Changes Ahead? For borrowers who took the PPP loan as a hedge against economic fallout, evaluate how your business has been affected, do you need to keep the loan and, if so, for how long? While it does not have to be filed, it must be complete and accurate. The Project Management Professional (PMP) ® is the world's leading project management certification. The Coronavirus Aid, Relief and Economic Security (CARES) Act temporarily expands eligibility for “small businesses” to reorganize under chapter 11 over creditor objection under a new law that streamlines chapter 11 reorganizations. If the PPP loan application for independent contractors is unchanged for 2021, you will need a tax-ready 2019 or 2020 Schedule C from your personal Form 1040 tax return. The SBA has announced that new loans under this second tranche of PPP appropriations will commence April 27, 2020. The FAQ’s discussion of public companies appears to be a reaction to the media backlash over the receipt of PPP loans by various public companies. As the PPP has evolved since its inception on March 27, so too have SBA and Treasury’s articulation of its requirements. New SBA Guidance Released: PPP Loan Certification Requirements for Good Faith April 27, 2020 The Small Business Administration ("SBA") recently released new guidance that may impact businesses that have previously received a Paycheck Protection Program ("PPP") loan. By Alexander B. Ginsberg, John E. Jensen, David B. Dixon, Matthew Oresman, Dinesh Dharmadasa. Stop. PPP applicants are required to make a number of certifications in connection with their applications, for example concerning their eligibility and the purposes for which they will use the loans. Borrowers who want to reassess the validity of their certification can return the loan proceeds by May 7, 2020. Borrowers must have considered “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.” This is the first time that SBA or Treasury has suggested the need to consider alternative liquidity. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. FAQ #46, issued on May 13, provides that “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.”. The new guidance reinforces that borrowers should carefully analyze and be prepared to demonstrate to the SBA the need for a PPP … Any borrower that applied for a PPP loan prior to April 23 will be deemed to have made the necessity certification in good faith if the loan is repaid in full by May 18. In relevant part, this Act increases by $310 billion the funds appropriated for the PPP established on March 27, 2020, by the CARES Act, whose provisions we summarized here. Wholly apart from the forgiveness criteria that the SBA may release, you should evaluate whether it is necessary for you to seek forgiveness on all or part of the loan, or whether you would rather keep the loan as a loan. The Section 1102 “paycheck protection program” statute sets forth a number of borrower Congress Passes American Rescue Plan: Summary of Key Impacts, ← PPP Update: Good News for Businesses with H-2A Workers, Fed Provides Clarity on Main Street Lending Program for Small and Medium-size Businesses →, The PPP program requires all borrowers to certify that “current economic uncertainty makes this PPP loan request necessary to support the ongoing operations of the Applicant.”. Guidance consistent with the original purpose of the PPP • New safe harbor: – “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 … For another thing, the Treasury and SBA announced today a safe harbor for small businesses borrowing less than $2,000,000. A knowing violation of the certification requirement – or other requirements of the CARES Act – may result in civil and, in more serious cases, criminal liability. In a PPP loan application, a borrower needs to certify that the “current economic uncertainty makes this loan request necessary to … This week, the SBA clarified its certification requirements for borrowers. On April 24, 2020, the SBA incorporated this safe harbor provision into. While we await clarity on whether the SBA will issue new guidance for loan forgiveness, including financial hardship criteria, we do know that borrowers are not required to ask for forgiveness for the entire loan. Current economic uncertainty makes the loan necessary to support your ongoing operations. We use cookies to ensure that we give you the best experience on our website. Lenders are expressly authorized to rely on such a certification by a PPP … You acknowledge that the lender will calculate the eligible loan amount using the tax documents you submitted. SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: 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. Proof of payroll or income. For more thought leadership on this rapidly developing topic, please visit our COVID-19 (Coronavirus) Resource Center. The project design and construction requirements are one of the most important inputs to the feasibility analysis. 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, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: 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. All the information you provided in your application and in all supporting documents and forms is true and accurate. You should be able to show that the loans helped to cover immediate losses, business disruption, avoid employee layoffs, avert uncertainty around consumers or suppliers, etc. It may be approached in different ways. Borrowers may be eligible for PPP loan forgiveness.. SBA is currently offering PPP loans until May 31, 2021.President Biden announced program changes to make access to PPP loans more equitable.. 1. And […] , many of which the SBA then formalizes through interim final rules that it publishes in the. Accordingly, all businesses, whether large or small and whether publicly or privately held, should take heed of this additional guidance in the FAQ and the scrutiny currently given to the PPP, and Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. 1. Article At the national and provincial levels, legislation governing PPPs is contained in the PFMA and Treasury Regulation 16. It is important to note that while the lead-in to new Question 31 of the FAQ refers to “businesses owned by large companies,” the answer would appear to apply to all borrowers, regardless of size. The PPP Standardized Terms of PPP Contract (“Standardization”). It supercharges careers for project leaders across industries and helps organizations find the people they need to work smarter and perform better. Lenders may rely on a borrower’s certification regarding the necessity of the loan request. COVID-19 and Economic Impact Resource Center, SBA Imposes New PPP Certification Requirement, Provides May 7 Safe Harbor, CARES Act Expands Eligibility Under the Small Business Reorganization Act: What Distressed Small Businesses and Their Creditors Should Know, COVID-19 Relief: Understanding SBA Loan Opportunities Under the CARES Act, Paycheck Protection Program Leaves Restaurant Industry With Questions. This documentation must include copies of the applicable requirements for each borrower location and relevant borrowers’ financial records. Pillsbury’s experienced multidisciplinary COVID-19 Task Force is closely monitoring the global threat of COVID-19 and providing real-time advice across industry sectors, drawing on the firm’s capabilities in crisis management, employment law, insurance recovery, real estate, supply chain management, cybersecurity, corporate and contracts law and other areas to provide critical guidance to clients in an urgent and quickly evolving situation. 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