All PPP loan recipients should be prepared to submit documents when applying for loan forgiveness that demonstrate the loan was necessary.
Borrowers who cannot assert in good faith their PPP loan was necessary should repay the loan by May 14th to avoid fines and penalties.
Gaunce Law recently discussed how some PPP loan recipients may face consequences if they do not repay their PPP loan by May 7th. In simple terms, the SBA has warned that companies who did not need the PPP loan to sustain ongoing operations could face fines and penalties, including criminal liability under certain circumstances. See our previous post for more details.
The SBA has released new guidance extending the deadline for repaying PPP loans without penalty from May 7th to May 14th. It was also announced that during the loan forgiveness process the SBA “will review all loans in excess of $2 million, in addition to other loans as appropriate, to verify the loan was “necessary.”
Borrowers who cannot assert in good faith that their PPP loan was “necessary” should repay the loan by May 14th to avoid potential consequences. All borrowers should be prepared to submit documents when applying for loan forgiveness that demonstrate their need for the loan. Borrowers should consider preparing financial projections as of the time they applied for the loan that demonstrate why the PPP loan was needed to sustain ongoing operations.
Gaunce Law remains committed to providing the business community with relevant, practical information about the PPP loan program and other pandemic-related assistance.