January 24, 2021

Volume XI, Number 24


January 22, 2021

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COVID-19: PPP Loans – Economic Need Determinations

In an apparent response to recent media focus on public companies receiving Paycheck Protection Program (PPP) loans, the Small Business Administration and the Department of the Treasury updated their Frequently Asked Questions to provide additional, although limited, guidance on the subject of a borrower’s need for a PPP loan. 

To receive a PPP loan, borrowers have been required to certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Many borrowers and potential borrowers wrestled with what “necessary” means in such an uncertain time, with predictions for the economic fallout from the pandemic varying dramatically on a macroeconomic scale, as well as from industry to industry and business to business. 

The new FAQs provide slightly more guidance on the analysis: potential borrowers must “take 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.” Furthermore, the guidance provides, as an example, that a public company with substantial market value and access to capital markets is unlikely to be able to make the required certification in good faith.

The questions of “necessity” and whether a business accessing other sources of liquidity would be “significantly detrimental to the business” requires a complex analysis regarding the business’ particular circumstances measured against a range of outcomes. That analysis will necessarily vary from geographic region to geographic region, industry to industry, and business to business. In other words, there is no one-size-fits-all equation.   

If a borrower determines that it cannot certify as to their need in good faith, they may return the funds by May 7, 2020, and be deemed to have made the required certification in good faith.  

©2020 Pierce Atwood LLP. All rights reserved.National Law Review, Volume X, Number 119



About this Author

Christopher E. Howard Corporate Finance Attorney Pierce Atwood Law Firm Portland Maine

Chris Howard has a unique combination of technical legal skills and hands-on business and finance experience, enabling him to integrate these disciplines into strategies that match client objectives and provide clients with a competitive advantage. His forte is in managing complex commercial transactions and development projects in time-sensitive environments, and in accessing all sectors of the capital markets.

Chris' practice has four areas of focus:

  • Corporate finance and transactional representation...

(207) 791-1335
Kris J. Eimicke, tax lawyer, Pierce Atwood

Kris Eimicke concentrates his practice on tax issues and economic development programs, with a special emphasis on state and federal new markets tax credit (NMTC) programs, renewable energy tax credits, historic rehabilitation tax credits, and the newly created opportunity zone program. Kris also regularly advises businesses, tax-exempt organizations, and individuals on tax issues related to a variety of business transactions, as well as representation before the Internal Revenue Service, state revenue agencies, and the courts on tax matters. 

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Andrea K. Suter Finance and Corporate Attorney Pierce Atwood Portland, ME

Andrea Suter represents start-up, family owned, and established companies in a wide range of businesses and industries. Her practice focuses on commercial transactions and contracts, mergers and acquisitions, finance and general corporate law matters.

Prior to joining Pierce Atwood, Andrea worked at well-respected law firms in California’s Bay Area and New York where she gained extensive experience advising clients on growing and realizing value through strategic mergers and acquisitions; efficiently raising capital through private placements, venture round financing and traditional...