December 7, 2021

Volume XI, Number 341

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December 06, 2021

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Paycheck Protection Program: SBA Clarifies Audit and Enforcement Intent Regarding Loan Recipient’s Financial Hardship Certification

On May 13, 2020, the Small Business Administration (SBA) updated its Frequently Asked Questions (FAQs) to provide important safe harbors on the Paycheck Protection Program’s (PPP) requirement that a borrower make a good faith certification that current economic uncertainty makes the PPP loan request necessary to support its ongoing operations.

Specifically, SBA has provided a safe harbor to borrowers that, together with their affiliates, received less than $2 million in loan proceeds. These borrowers will be deemed to have made the required certification concerning the necessity of the loan request in good faith.

With respect to borrowers who received more than $2 million in loan proceeds, if the SBA determines that the borrower lacked an adequate basis for the certification, the SBA will seek repayment of the loan. If the borrower repays the loan, it will avoid further enforcement action regarding the need determination. An open question remains as to the timeline in which repayment must be made to avoid further enforcement. 

Many borrowers and potential borrowers have 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. With these new FAQs, the SBA appears to be taking a practical approach to enforcement with respect to the financial need determination. 

©2021 Pierce Atwood LLP. All rights reserved.National Law Review, Volume X, Number 134
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About this Author

Kris J. Eimicke, tax lawyer, Pierce Atwood
Partner

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. 

(207) 791-1248
Elizabeth Frazier Govt Relations Attorney Pierce Atwood Law Firm
Associate

Elizabeth Frazier focuses her practice on government relations, dividing her time between Pierce Atwood’s Portland and Augusta, Maine offices.

A native of Maine, Elizabeth grew up around her family’s small business, working on all aspects of business growth and management. She has an intimate understanding of the realities and requirements of running a business in Maine.

Additionally, she has worked in government and politics throughout her career. In 2008, Elizabeth worked as a grass roots coordinator for Obama for President in New Hampshire. Elizabeth then followed her...

207-791-1155
Kathleen Hamann White Collar Attorney Pierce Atwood Washington, DC
Partner

Kathleen Hamann is an internationally recognized authority in the field of white collar enforcement and compliance matters. Drawing on her nearly 20 years of service to the federal government, in roles at the US Department of Justice and Department of State, Kathleen helps clients navigate the complexities of U.S. and transnational criminal liability and multijurisdictional government investigations.

Since returning to private practice, Kathleen has represented clients in a number of transnational matters, conducting global risk assessments, designing compliance programs, and...

202-530-6409
Christopher E. Howard Corporate Finance Attorney Pierce Atwood Law Firm Portland Maine
Partner

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

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...

207-791-1157
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