On Tuesday, April 28th, US Treasury Secretary Steven Mnuchin stated in an interview on CNBC that any Paycheck Protection Program (PPP) loan in excess of $2 million will be subject to “full review” before it could be forgiven. It is expected this audit would confirm borrower eligibility and need in addition to compliance with forgiveness requirements. Additionally, in a separate interview with Fox Business, Mnuchin warned of potential criminal liability if the SBA determines that the borrower improperly applied for and received funding for a PPP loan.
This latest clarification follows guidance provided last Thursday (April 23), where the Treasury Department addressed whether large companies with “adequate sources of liquidity” to support the business’s ongoing operations qualify for PPP loans. In Question 31 of the FAQ, they state that “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.” In this same FAQ, they provided a safe harbor whereby any business that took a loan prior to the issuance of the guidance and repays the loan in full by May 7, 2020 would be deemed by the SBA to have made the required certification in good faith.
When coupled with ongoing media scrutiny of the PPP program and the resulting heightened interest from both the Treasury department and Congress, PPP loan recipients should review the criteria on which they based their original loan decision. All borrowers, and particularly those with loans in excess of $2 million, may be required to evidence their assessment of eligibility and need. You should also consider having legal counsel evaluate the impact of these most recent announcements on the original application. For further reference, the Treasury Department PPP FAQ document can be accessed here.