On May 13th, the SBA released additional guidance stating that businesses that received PPP loans of less than $2 million will be given safe harbor concerning the necessity of their loans.
This guidance comes after much confusion regarding the vague language in the PPP application which required borrowers to certify that “current economic uncertainty” makes the loan necessary.
Over the course of the last several weeks, the SBA has released a series of FAQs attempting to further clarify eligibility and also advised borrowers of all sizes that taking a PPP loan in bad faith may result in a criminal investigation. It urged borrowers that were uncertain of their qualification to return the funds to the SBA by May 14th.
With one day left before the May 14th deadline, the SBA announced today that recipients of loans under $2 million will have been “deemed to have made the required certification in good faith.” The SBA, in partnership with the Treasury, determined that this was appropriate because smaller business have less access to adequate sources of liquidity, in addition to the need to preserve the SBA’s available audit resources.
While loans over $2 million will be the focus of audit scrutiny, they further clarify that if any borrower is deemed to lack an adequate basis for certification, then the SBA will seek repayment and the loan will not be forgiven.
The new safe harbor provision can be found in FAQ #46, on the newly released SBA FAQ here.
