Recent Guidance for Small Businesses Applying for PPP Loan

As Congress prepares to add an additional $320 billion to the Paycheck Protection Program, which was created under the CARES Act on March 27, 2020, the Small Business Administration, in consultation with the Department of Treasury, has updated its guidance in an effort to narrow the scope of those eligible to receive PPP loans.  The CARES Act provides that the borrower of a PPP loan must certify “that the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient.” The newly issued guidance provides the following:

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.

If you have any questions or need assistance in connection with your PPP loan or application, please contact one of our business and corporate attorneys at 941.748.0100. To reach Jenifer Schembri, email

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