5/1/20 - Documenting Your Need for PPP Relief

An essential element of your Paycheck Protection Loan (PPP) application is your certification that, “current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.” The Small Business Administration (SBA) has recently announced that borrowers could be asked to substantiate their need for relief through the Paycheck Protection Program (PPP). As a result of these program refinements, we strongly recommend that your need for these PPP funds be documented. This can be in the form of a detailed memo, a cash flow forecast, a forward-looking budget, or other analysis deemed suitable by you. This will assist you in verifying your business is eligible for a PPP. Whatever form your documentation takes, we suggest it include:

  • The impact on current and future revenue, including decreased demand, potential closures, etc.

  • Uncertainty of upcoming cash flow

  • The effect of employee absenteeism and potential replacement for labor costs

  • Discussions with all owners and any external advisors (i.e. accountants, attorneys)

  • Efforts taken to find alternative funding

  • Communications with existing lenders and any restrictions or covenants that would limit or eliminate the ability to obtain alternative funding

  • Plans to use the PPP proceeds for payroll and other costs which sustain operations of the business and employment of your workforce

Treasury Secretary Mnuchin announced this week that recipients of a PPP over $2 million will be audited by the SBA, so it is critical for such borrowers to prepare this documentation. We recommend consultation with legal counsel, accountants and other advisors to prepare adequate documentation to support the good faith certification.


Your professionals at Castellano Korenberg & Co. are always available to assist you through this tough time of trying to make sense of all the new regulations being passed. Stay up to date with the most recent information by visiting castellanokorenberg.comcall us at 516-937-9500, or contact your CK professional for more information.

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