In response to public scrutiny concerning Paycheck Protection Program (PPP) loans being disbursed to large companies like Shake Shack, the Small Business Administration (SBA) quickly produced Frequently Asked Question (FAQ) #31 to clarify the required necessity certification for PPP applicants. The SBA stated in the recently issued FAQ #46 that all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” To give borrowers the opportunity to review and consider the implications of FAQs #31 and #46, the deadline for ineligible borrowers to return PPP loan proceeds has been extended to May 18th. If loan proceeds are returned by the May 18th deadline, the SBA will not pursue penalties or refer the matter to other agencies.
Although FAQs #31 and #46 are specific to the required necessity certification, all PPP borrowers should carefully consider all the certifications contained in the PPP application. Keep in mind that a borrower who knowingly makes a false statement to obtain a loan may face imprisonment up to 30 years and/or a fine up to $1 million. Given the possibility of steep penalties, if a borrower feels it received a PPP loan that it was not entitled to, for whatever reason, now is the time to act within the extended safe harbor deadline. If there is any doubt regarding one’s eligibility for an already disbursed PPP loan, do not hesitate to contact a trusted legal advisor at McCarthy Lebit that can inform you of all the SBA safe harbor guidelines.
