PPP Certification Opinions

May 07, 2020
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FRB is Now Offering PPP Certification Opinions of Economic Necessity

Falcon Rappaport & Berkman LLP and the FRB Covid-19 Task Force is now offering PPP Certification Opinions for businesses that are seeking clarity as to whether their PPP Loan is truly “economically necessary,” or simply want peace of mind that when it comes time to seek PPP Loan forgiveness, their actions will be seen as taken in good faith and they won’t be left out in the dark with an unforgivable PPP Loan, or worse.

PPP Background

The Payroll Protection Program (“PPP”) of the CARES Act was signed into law just weeks ago. Businesses owners facing the unprecedented threat to their businesses caused by the Coronavirus pandemic took action to seek immediate backstop funding to retain their employees. Millions of business rushed to apply for PPP loans to provide for their staff and keep their businesses running.

In order to obtain a PPP Loan, business owners were required to certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” However, on April 23, 2020, in the wake of headlines disclosing that large publicly traded companies unnecessarily obtained PPP loans, the SBA issued further clarification of the standard by which businesses should determine if they truly had an economic need for a PPP loan.

Treasury Threatens Loss of PPP Forgiveness, Audits and Criminal Action

The United States Treasury subsequently announced that they will audit PPP Loans above $2 million before providing PPP forgiveness for such loans. Treasury further provided that taking any unnecessary PPP Loan is not only disallowed, but may result in an audit, or perhaps even risk criminal consequences. The United States Department of Justice is already seeking criminal charges against businessmen allegedly seeking fraudulent PPP Loans.

On the other hand, in further response to high-profile PPP Loans which may have not been truly necessary, the SBA created a safe-harbor and provided that any borrower that applied for a PPP Loan prior to April 23, 2020, and repays the loan in full by May 14, 2020 will be deemed by the SBA to have sought a PPP Loan in good faith.  See the SBA PPP FAQs.

Many business owners are now forced to make a choice in a matter of days whether to give up on funding which might otherwise be a lifeline for their business and their employees, or to risk keeping their PPP Loan, but potentially losing out on PPP forgiveness, face a Treasury audit, or worse, criminal prosecution.

PPP Certification of Necessity

In response, FRB is working with small business owners to provide an opinion as to whether their PPP Loan is appropriate and truly necessary to support their ongoing operations. FRB is additionally available to advise on other aspects of the PPP Loan process.  Please contact us to learn additional details and to see if we can advise as to the circumstances of your PPP Loan, or if a PPP Certification Opinion is appropriate for your business.

DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.

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