What are you certifying when you apply for a PPP loan? (Application tips)

In this 4-minute read:

• What are you attesting to or certifying to when you apply for a first draw PPP loan?
• What do you need to certify to in order to apply for a second-draw PPP loan?

The Paycheck Protection Program has provided nearly $650 Billion in relief for America’s small businesses, independent contractors, gig workers, and self-employed individuals. Womply has helped over 200,000 of these people with their PPP loans, and we’re working hard to get every eligible person approved. 

One of the questions that comes up, and which we think everyone should be aware of, is “What am I certifying or agreeing to when I apply for a PPP loan?” 

Since the SBA’s PPP loan has been set up from the start to be easy and simple for America’s small businesses to qualify for, a lot of the usual loan qualification requirements have been waived. Because of the emergency nature of the pandemic, essentially if you are an American business, independent contractor, sole proprietor, self-employed individual (or eligible partnership, C or S corporation, non-profit, etc.) in operation as of February 15, 2020 and you meet the general standards, you are likely eligible for the loan. 

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For example, you don’t need the following to qualify for a PPP loan:

• Collateral
• A personal guarantee
• A credit check (some lenders may still perform one)
• Underwriting
• A demonstration that you are unable to obtain credit elsewhere

You also will not need to pay any loan origination fees or any other fees to your lender or the SBA to apply or get approved. By law, nobody may charge you to apply for a PPP loan.

So what are you attesting to or certifying when you apply for a PPP first or second draw loan? The PPP application process has been streamlined for 2021, but you still are certifying that you meet certain conditions. Let’s go over them.

What do I need to certify to when I apply for a PPP loan?

Note: we have made an effort to be as accurate as possible for this article, but there may be inaccuracies or changes made to the application forms and processes. Be sure to go over the latest application forms with your lender for the most recent certifications.

When you apply for a PPP first draw loan, you will need to certify that:

• You have read and understand the statements included in the PPP application form, including the Statements Required by Law and Executive Orders
• You are eligible to receive a loan under the rules in effect at the time your application is submitted that have been issued by the Small Business Administration and the Department of the Treasury 
• You, together with any affiliates (if applicable)
  • (1) are an independent contractor, self-employed individual, or sole proprietor with no employees;
  • (2) if not a housing cooperative, eligible 501(c)(6) organization, or eligible destination marketing organization, employ no more than the greater of 500 employees or, if applicable, the size standard in number of employees established by SBA in 13 C.F.R. 121.201 for the your industry;
  • (3) if a housing cooperative, eligible 501(c)(6) organization, or eligible destination marketing organization, employ no more than 300 employees;
  • (4) if NAICS 72, employ no more than 500 employees per physical location;
  • (5) if a news organization that is majority owned or controlled by a NAICS code 511110 or 5151 business or a nonprofit public broadcasting entity with a trade or business under NAICS code 511110 or 5151, employ no more than 500 employees (or, if applicable, the size standard in number of employees established by SBA in 13 C.F.R. 121.201 for your industry) per location; or
  • (6) are a small business under the applicable revenue-based size standard established by SBA in 13 C.F.R. 121.201 for your industry or under the SBA alternative size standard
• You will comply, whenever applicable, with the civil rights and other limitations in the application form
• All loan proceeds will be used only for business-related purposes as specified in the loan application and consistent with the Paycheck Protection Program Rules, including the prohibition on using loan proceeds for lobbying activities and expenditures. If you are a news organization that became eligible for a loan under Section 317 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, proceeds of the loan will be used to support expenses at the component of the business concern that produces or distributes locally focused or emergency information
• You understand that the SBA encourages the purchase, to the extent feasible, of American-made equipment and products
• You are not engaged in any activity that is illegal under federal, state or local law
• Any EIDL loan you received between January 31, 2020 and April 3, 2020 was for a purpose other than paying payroll costs and other allowable uses for loans under the Paycheck Protection Program Rules

If you’re applying as an individual, you will also be authorizing the SBA to request criminal record information about you from criminal justice agencies for the purpose of determining your eligibility for SBA loans.

You will need to certify that you actually need a PPP loan and will spend funds appropriately

But that’s not all. You also need to certify that you actually need this loan (which makes sense), and that you will use the money in the approved ways, among other things.

Specifically, you must certify in good faith the following:

• That you were in operation on February 15, 2020, have not permanently closed, and were either an eligible self-employed individual, independent contractor, or sole proprietorship with no employees, or had employees for whom you paid salaries and payroll taxes or paid independent contractors, as reported on Form(s) 1099-MISC
• Current economic uncertainty makes this loan request necessary to support your ongoing operations
• The funds will be used for at least one (or more) of the following:
  • To retain workers and maintain payroll [and, as we have discussed before, for independent contractors, sole proprietors, and self-employed individuals, paying yourself counts as maintaining payroll]
  • To make payments for mortgage interest, rent, utilities, covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures as specified under the Paycheck Protection Program Rules
• You understand that if the funds are knowingly used for unauthorized purposes, the federal government may hold you legally liable, such as for charges of fraud
• You understand that loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, covered utilities, covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures, and not more than 40% of the forgiven amount may be for non-payroll costs. If required, you will provide to your lender and/or to the SBA documentation verifying the number of full-time equivalent employees on your payroll as well as the dollar amounts of eligible expenses for the covered period following this loan
• You have not and will not receive another loan under the Paycheck Protection Program [NOTE: this does not include Paycheck Protection Program second draw loans]
• You have not and will not receive a Shuttered Venue Operator grant from SBA
• The President, the Vice President, the head of an Executive department, or a Member of Congress, or the spouse of such person as determined under applicable common law, does not directly or indirectly hold a controlling interest in you or your company, with such terms having the meanings provided in Section 322 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act
• You are not an issuer, the securities of which are listed on an exchange registered as a national securities exchange under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f)
• That the information provided in this application and the information provided in all supporting documents and forms is true and accurate in all material respects
• You understand that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable under the law, including under 18 U.S.C. 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 U.S.C. 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a federally insured institution, under 18 U.S.C. 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000
• You acknowledge that your lender will confirm the eligible loan amount using required documents submitted
• You understand, acknowledge, and agree that your lender can share any tax information that you have provided with SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews

Loans under $2M will be deemed to have made the required certification in good faith

NOTE: although, when submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant,” the SBA has issued a “safe harbor” statement to the effect that if your loan is for less than $2 million, you will be deemed to have met this certification.

Read more about the $2M safe harbor threshold.

You do NOT need to complete the demographic information to be approved for a PPP loan

Demographic disclosure is voluntary and will have no bearing on your PPP loan application decision.

Additional certifications required for Second Draw PPP loans

When you apply for a second-draw PPP loan, in addition to the certifications above for first-draw loans, there are some requirements specific for second draw loans. For second draw loans, you will need to certify:

You, together with any affiliates (if applicable):

• (1) are an independent contractor, self-employed individual, or sole proprietor with no employees;
• (2) employ no more than 300 employees; or
  • (3) if NAICS 72, employ no more than 300 employees per physical location;
• (4) if a news organization that is majority owned or controlled by a NAICS code 511110 or 5151 business or a nonprofit public broadcasting entity with a trade or business under NAICS code 511110 or 5151, employ no more than 300 employees per location

According to the SBA application forms available at the time of publication of this article, you will also need to certify in good faith the following (in addition to the certifications discussed above in the section on first-draw loans):

• You have realized a reduction in gross receipts in excess of 25% relative to the relevant comparison time period.
  • For loans greater than $150,000: you have provided documentation to the lender substantiating the decline in gross receipts
  • For loans of $150,000 or less: you will provide documentation substantiating the decline in gross receipts upon or before seeking loan forgiveness for the Second Draw Paycheck Protection Program Loan or upon SBA request
• You received a First Draw Paycheck Protection Program Loan and, before the Second Draw Paycheck Protection Program Loan is disbursed, will have used the full loan amount (including any increase) of the First Draw Paycheck Protection Program Loan only for eligible expenses
• You have not and will not receive another Second Draw Paycheck Protection Program Loan
• You are not a business concern or entity (a) for which an entity created in or organized under the laws of the People’s Republic of China or the Special Administrative Region of Hong Kong, or that has significant operations in the People’s Republic of China or the Special Administrative Region of Hong Kong, owns or holds, directly or indirectly, not less than 20 percent of the economic interest of the business concern or entity, including as equity shares or a capital or profit interest in a limited liability company or partnership; or (b) that retains, as a member of the board of directors of the business concern, a person who is a resident of the People’s Republic of China
• You are not required to submit a registration statement under section 2 of the Foreign Agents Registration Act of 1938 (22 U.S.C. 612)

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