On May 13, 2020, the Treasury and the SBA issued a new FAQ #46 which provides an important safe harbor for borrowers that received Paycheck Protection Program (PPP) loans of less than $2 million. The CARES Act requires that borrowers certify that “the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations.” Triggered by businesses that obtained PPP loans yet had significant access to other money to help them through this crisis, the Treasury and SBA issued follow up guidance that unfortunately created confusion for many borrowers as to whether they could make the certification in good faith and even required that loans be returned by May 18th if borrowers were concerned with the sufficiency of their certification of need. This latest FAQ from the Treasury states, “Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.” Since there are no other apparent requirements to qualify for the safe harbor, this effectively takes the certification issue off the table for loans under $2 million.
The SBA will still review all loans of $2 million and more to determine if the borrower “lacked an adequate basis for the required certification concerning the necessity of the loan request.” If the SBA makes that determination, then the loan will be required to be repaid and no forgiveness will be provided.