The CARES Act requires each applicant applying for a PPP loan to certify in good faith “that the uncertainty of current economic conditions makes necessary the loan request to support the ongoing obligations” of the applicant. SBA, in consultation with Treasury, issued additional guidance concerning how SBA will review the required good-faith certification. This guidance included a safe harbor providing that any PPP borrower, together with its affiliates, that 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.
In light of the additional flexibility being provided to certain borrowers to use their gross income amount, as reported on line 7 of IRS Form 1040, Schedule C, borrowers that elect to use gross income to calculate their maximum loan amount for a First Draw PPP Loan and that report more than $150,000 in gross income on the Schedule C that was used to calculate the borrower’s loan amount will not automatically be deemed to have made the required certification concerning the necessity of the loan request in good faith. SBA may review their certification that “Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” If SBA determines that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA may determine that the borrower was not eligible for the loan, for the loan amount, or for loan forgiveness.