Borrowers who applied for PPP loans eligible for forgiveness are required to certify in good-faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant,” according to additional guidance issued jointly today by the US Treasury Department and the Small Business Administration (SBA).
SBA guidance and regulations provide that any borrower who applied for a PPP loan prior to April 24, 2020 and repays the loan in full by May 14, 2020 will be deemed by SBA to have made the required certification in good faith.
According to the SBA’s FAQ #46 released on May 13, 2020, SBA is extending the repayment date for the safe harbor to May 18, 2020, to give borrowers an opportunity to review and consider FAQ #46.
For loans less than $2 million:
- Any borrower will be deemed to have made the required certification concerning the necessity of the loan request in good faith.
For loans greater than $2 million:
- Borrowers that do not satisfy the May 18th repayment safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance.
- If the SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification, SBA will seek repayment of the “outstanding PPP loan balance” and will inform the lender that the borrower is not eligible for loan forgiveness. The “outstanding PPP loan balance” is effectively the full amount of loan proceeds received given that no forgiveness was granted. (We also believe that any accrued interest on the loan amount will need to be repaid.)
- If the borrower repays the loan (plus accrued interest) after receiving SBA notification, SBA will not pursue administrative enforcement or referrals to other agencies.
If you have questions or need advice on your specific situation, please contact us. We’re here to help.