As the editor of BankBCLP.com, I tend not to write a lot of posts for other blogs hosted by Bryan Cave Leighton Paisner LLP. However, the Paycheck Protection Program(PPP) has affected small business clients throughout the firm.

The shifting narratives around the government’s interpretations regarding eligibility for participation in the PPP has caused many borrowers to reconsider their own applications and to consider exiting the program by returning PPP funds by the government’s current safe harbor return deadline of May 14th.

In this post on the BCLP US Securities and Corporate Governance Blog, I describe the history and background of the PPP certification process, and suggest a three bucket risk framework for analyzing one’s certification. In discussions with corporate clients, we have found this framework to be useful for public and private companies.

As recognized in FAQ 31, this remains primarily a risk for PPP borrowers, and not PPP lenders, as “lenders may rely on a borrower’s certification regarding the necessity of the loan request.” In our experience, this has also made many lenders reasonably constrained from providing any further advice to borrowers regarding analysis of the borrower’s certification.

As part of the PPP loan application process, each borrower must certify that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”  This certification is one of seven certifications that borrowers must certify in good faith as part of the PPP loan application.  Neither the PPP loan application nor the text of the certification has been changed since implementation of the PPP on April 3, 2020.

With the backdrop of increasing criticism with regard to a small number of PPP borrowers, in a series of informal guidance releases, the Treasury and SBA have provided further guidance on what the Treasury and SBA appear to believe is required by this certification.

Continue reading for the PPP certification risk framework.