The SBA and the Treasury have published a new Frequently Asked Question (FAQ) for the Paycheck Protection Program (PPP), FAQ #31, which asks whether businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for PPP loans.
Notably, this FAQ was released two days after the Senate, and on the same day the House, passed H.R. 266, the Paycheck Protection Program and Health Care Enhancement Act, which provided the PPP with an additional $310 billion.
In answer to FAQ #31, the agencies remind borrowers they must certify in good faith that their PPP loan request is necessary to support their ongoing operations, taking into consideration their current business activity and their ability to access other sources of liquidity. By example, the agencies state it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith.
The agencies conclude, “Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith.”
Note: Under heightened attention, a number of large companies that received a PPP loan prior to this issuance have in fact publically stated that they have returned the PPP funding.
Separately, and also on April 23, the Federal Reserve Board released two press statements related to the SBA’s Paycheck Protection Program. In particular:
- For FRB liquidity and lending facilities using CARES Act funding, which includes the FRB’s Paycheck Protection Program Liquidity Facility (PPPLF), the FRB will report, on a monthly basis;
- Names and details of participants in each facility
- Amounts borrowed and interest rate charged
- Overall costs, revenues, and fees for each facility.
- The FRB is working to expand access to the PPPLF for additional SBA-qualified lenders. At present, only depository institutions are eligible to participate in the PPPLF though the SBA has approved nonbanks to function as lenders for the PPP.