Since the CARES Act was first enacted at the end of March, the Treasury Department and the Small Business Administration (SBA) have continued to update their guidance regarding the Paycheck Protection Program (PPP). These updates, including numerous ones within the last week, have come in the form of press releases, multiple interim final rules and a FAQ document.

It is important to note that some of the recent guidance comes on the heels of media reports about larger businesses with plenty of liquidity and access to capital taking advantage of the PPP. With that in mind, some of the guidance referenced the importance of the certification process and companies with private equity ownership.

In a recent update to their PPP FAQ document, the SBA answers the following question, “Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?” In response to the question, the SBA includes the following:

All borrowers should review carefully the required certification that ‘[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.’ Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, 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, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification. Lenders may rely on a borrower’s certification regarding the necessity of the loan request. 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.

In the days after this guidance was issued, the Treasury and the SBA went into more detail when they issued the following statement:

We have noted the large number of companies that have appropriately reevaluated their need for PPP loans and promptly repaid loan funds in response to SBA guidance reminding all borrowers of an important certification required to obtain a PPP loan. To further ensure PPP loans are limited to eligible borrowers, the SBA has decided, in consultation with the Department of the Treasury, that it will review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the borrower’s loan forgiveness application. Regulatory guidance implementing this procedure will be forthcoming.

In additional guidance from a recent interim final rule, the SBA addresses whether SBA affiliation rules would prohibit a portfolio company of a private equity fund from being eligible for a PPP loan. The interim rule notes that affiliation rules apply to private equity-owned businesses in the same manner as any other business subject to outside ownership or control. However, the SBA also notes that “in addition to applying any applicable affiliation rules, all borrowers should carefully review the required certification on the PPP Borrower Application Form stating that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”

The Big “I” will continue to provide updates on the program through Markets Pulse and News & Views e-newsletters. The association has also posted this guidance from the SBA on the Government Affairs website and will continue to post any additional guidance as it is released.

Wyatt Stewart is Big “I” senior director of federal government affairs.