Reportedly more than 100 public companies received more than half a billion dollars of funds available under the SBA’s Paycheck Protection Program.  On April 23, 2020, the U.S. Department of Treasury published new guidance suggesting public company participants who could not demonstrate sufficient need could be subject to scrutiny unless they return the funds by May 7, 2020.

PPP applications require certification that “[c]urrent economic uncertainty makes this loan request necessary to support ongoing operations.”  To the extent that public companies may have had other reliable, accessible sources of capital markets funding, the borrower’s certification of economic need could be called into question.  In light of this new guidance, public companies should analyze the risks associated with participation in the PPP.

April 23, 2020 Treasury Guidance – PPP FAQ Question 31

The Treasury guidance focuses on sources of potential liquidity other than potential participation in the PPP. The U.S. Treasury posits: “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”.

Treasury provides a safe harbor for applications filed prior to