How This Will Work
The announcement describes that for all loans made in excess of $2 million that such loans will be subject to a full review of the applicant’s certifications of need once the applicant’s lender has submitted the applicant’s forgiveness request. In comments to the press Tuesday (April 28) morning, Secretary Mnuchin stated that only after this review has been conducted will forgiveness be granted to those considered eligible.
Treasury and SBA also announced that guidance implementing this procedure will be forthcoming.
Practical Impact
For clients with loan requests in excess of $2 million, it is strongly recommended that they analyze their certification in light of the above as soon as possible and in any event by May 7, 2020, which is the end of the grace period for borrowers to return funds without penalty if certification requirements are not met. It would appear that Treasury intends to conduct the review through the SBA, so an additional practical consideration for such borrowers will be of potential significant delay in processing forgiveness requests.
This is consistent with prior observations that scrutiny is likely to increase over time and particularly as it relates to PPP loan forgiveness.
Please reach out to GHJ’s COVID-19 Resource Team if you have any questions specific to your businesses on the PPP loan, CARES Act or any other COVID-19-related legislation or issues.
