Are You Applying For the PPP in Good Faith? How to Document Your PPP Loan Application Decision

One important aspect of applying for a PPP loan is certifying in good faith that your loan request is necessary. The PPP application asks you whether “current economic uncertainty makes your loan request necessary to support your ongoing operations.”

We have put together this list of considerations to help you assess in good faith and officially justify your need for this emergency funding. Read this today to ensure your business has made an informed decision and good faith effort to prepare and complete this certification.

The SBA is likely to step up audit efforts, so store all supporting documentation in a central file and keep this information indefinitely. SBA has not defined an audit or lookback period, so you never know when you may need to dust off these records. Take this record-keeping seriously to avoid headaches down the road.

How to review and document your PPP decision process:

Save documentation you would normally compile in making a business decision for an organization of your size, governance structure, and stability. This will include some or all of the following.

• Quantitative and qualitative data documenting the uncertainties your business faces from COVID-19
• Listing of the availability, terms, and conditions of sources of liquidity other than a PPP loan
• Records of your general financial condition and trends of the underlying business
• Detailed analysis of actual or projected revenue, expense, and cash flow from January 2020 through September 2020
• Evaluation of the extent to which the current economic conditions impact forecasting ability
• Consideration of the effect of the pandemic on the workforce and headcount of your organization
• Comparison of actual to budget financial results to assess the effect of COVID-19 on business operations and performance
• Detailed analysis of liquidity needs of the business such as capital expenditures, and whether those liquidity needs can be satisfied
• Documentation of customer requests for more favorable terms, payment relief/extensions, and inability to meet existing contractual obligations
• Analysis of changes in your customer base such as a decrease in website traffic, click-through rates for advertisements, and increased customer churn
• Records of supply chain issues regarding raw materials shortages and shipping delays
• Records of the effects of vendor financial difficulties, such as vendors requests for larger pre-payments or payment in full
• Chronology of government-mandated shutdowns and stay-at-home orders where the business maintains a presence

If you are able to prepare a memo containing as much of this information as possible, you should feel comfortable you made a good faith effort in signing off on the application certifications.

If you are not able to compile this information, or if the information does not reflect a pressing need due to economic uncertainty, you should speak with your Wiss representative and evaluate your options.

In most cases, if you have fully evaluated your business needs and the economic uncertainty wrought by COVID-19, you should not have an issue certifying your eligibility for a PPP loan.

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