SBA Updates “Economic Uncertainty” Certification Guidance

By Mark McCallum posted 05-14-2020 03:34 PM


By Aron C. Beezley, Frederic L. Smith Jr., and Elizabeth M. Boone of Bradley Arant Boult Cummings LLP
Published May 13, 2020

Republished with permission. Originally published on the blog SBA Updates “Economic Uncertainty” Certification Guidance by Bradley Arant Boult Cummings LLP. Copyright 2020.

The Small Business Administration issued an important update to its answers to frequently asked questions about the Paycheck Protection Program (PPP) on May 13, 2020:

Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?

Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates,20 received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.

SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.

Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.

Bradley will continue to monitor and report on the SBA’s evolving PPP guidance. If you have any questions about the PPP or related issues, please feel free to contact Aron BeezleyFrederic Smith, or Elizabeth Boone.

Aron C. BeezleyAron C. Beezley is the co-leader of Bradley’s Government Contracts Practice Group. His vast experience includes representation of government contractors in a variety of industries and in all aspects of the government-contracting process, including negotiation, award, performance and termination. He can be contacted at or 202.719.8254.


Frederic L. Smith Jr.Frederic L. Smith Jr. is a Partner with Bradley. He has experience advising businesses on M&A transactions, contract negotiations, business succession issues, joint venture transactions and financing transactions. He has a particular focus representing companies in the construction, manufacturing, construction aggregates, oil and gas services, and real estate industries. He can be reached at or 205.521.8486.


Elizabeth M. BooneElizabeth M. Boone is a Partner with Bradley. She advises clients on business transactions and compliance matters domestically and internationally, including contract negotiation, establishment and maintenance of legal entities, establishment of terms and conditions for the sale of goods, privacy compliance matters, employment matters and real estate transactions. She can be reached at or 601.592.9924.