SBA Provides Safe Harbor for Paycheck Protection Program Loans Under $2M

This week, the United States Treasury and Small Business Administration issued additional guidance concerning the Coronavirus Aid, Relief and Economic Security (CARES) Act’s Paycheck Protection Program (PPP).

The guidance is likely welcome news to small business owners worried about stipulations with loan forgiveness under the act. The guidance is contained in Question 46 in the Treasury’s PPP Q&A resources.

For businesses that accepted less than $2 million in PPP funds, the SBA will assume that the business performed the required certification concerning the necessity of their loan requests in good faith. However, the safe harbor only applies to the necessity certification—borrowers who have other concerns about the application should look carefully at any other potential issues. The deadline to repay the loan in full is May 14. 

For businesses above the $2 million threshold, the SBA guidance states the entity will evaluate whether the company had “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.”

Essentially, the language allows the SBA to reconsider questions or concerns about a particular borrower and withholds the right to audit the borrower, if so. This can happen even if records state the borrower acted in good faith when applying for the loan. If the SBA does disagree with the borrower’s basis for its application, the borrower must repay the entire PPP loan. 

Outside of this helpful clarification, the guidance answers many questions that have been brought up recently concerning the PPP loan application and certification, including clarifications over business size, whether the PPP loans cover sick leave, and more. Read the SBA’s guidance here.