The Small Business Administration, in tandem with the Treasury Department, released guidance Thursday intended to halt large companies’ access to small-business loans under the Paycheck Protection Program.
The House is set to vote Thursday on boosting PPP funds by $320 billion and also approved a House Rules Committee plan to set up a select subcommittee to oversee how those PPP funds are distributed.
Sen. Ben Cardin, D-Md., said on an early Thursday afternoon webcast held by the American Council for Capital Formation that the new PPP funds “will be available as early as tomorrow.”
The PPP loans, of which 1.6 million were given “during the first tranche” of the program, Cardin said, are meant to “keep workforces at small businesses together during this pandemic so that people are employed, but more importantly, for our economy, that a small business has its workforce together and ready to respond when this virus is under control.”
In just-released frequently asked questions guidance, which updates earlier guidance, the SBA states in Q&A No. 31 that “it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required [loan] certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.”
As to whether businesses owned by large companies with adequate sources of liquidity to support the business’ ongoing operations qualify for a PPP loan, the SBA said that in addition to reviewing “applicable affiliation rules” … 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.”
While the Coronavirus Aid, Relief and Economic Security Act “suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere …, borrowers still must certify in good faith that their PPP loan request is necessary,” SBA said.
“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.’”
Lenders may also rely on a borrower’s certification regarding the necessity of the loan request, SBA said. “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.”
— Check out House to Vote in Person Today on Loan Funding on ThinkAdvisor.