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Good Faith Determinations Under the Paycheck Protection Program - Business Law News

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Business Law News

Posted on: May 20, 2020

By Peter M. Elliott, Indiana Commercial Court

The Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) has made billions of dollars in loans available to qualifying businesses.  As part of the application process, businesses have had to make a good-faith certification that seeking loans under the PPP is necessary. There is no explicit guidance on what is exactly meant by"good-faith" under the CARES ACT, but applicants are asked, among other inquiries, to assess their ability to obtain other sources of liquidity and to provide specific documentary evidence of the need for a PPP loan.

 Recently, the Small Business Administration amended the guidance on the good-faith certification of necessity based on the amount borrowed. For businesses who have applied for or have already received in aggregate less than $2 million in PPP loans, the certification of necessity will be presumed to have been made in good faith. Borrowers of $2 million or more in PPP loans, however, cannot take advantage of this new safe harbor. 

Writing for Business Law Today,  Mark D. Hobson, of the firm Halloran Farkas + Kittila LLP, discusses the recent safe harbor amendment in greater detail as it pertains to businesses borrowing less than $2 million ("Micro-Borrowers") and businesses borrowing $2 million or more ("Significant Borrowers"). Mr. Hobson provides additional guidance for Significant Borrowers when making the good faith certification of necessity.

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