Following the Department of the Treasury’s update on May 5, 2020 around the Paycheck Protection Program (PPP) Loans FAQ document, today the Treasury issued further guidance on how they will review the certification that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” In this guidance, they provide a safe harbor for any borrower that, together with its affiliates, received PPP loans of less than $2 million where they will assume the borrower made required certification concerning the necessity of the loan request in good faith due to an assumed lack of access to liquidity given their small size. In addition, if the SBA determines in the course of a loan review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request.
You should review the latest guidance in detail and contact legal counsel to evaluate the impact on your eligibility for the PPP loan. As a reminder, borrowers may take advantage of a safe harbor, originally established on April 23, 2020 which allows any business that accepted a loan prior to the issuance of this updated guidance and repays the loan in full by Thursday, May 14, 2020 to be deemed by the SBA to have made the required certification in good faith. The updated guidance can be found in Question 46 of the FAQ document here.