Small Business Administration to Review PPP Loans Over $2 Million
The Small Business Administration (“SBA”) continues to provide more guidance clarifying a borrower’s required good faith certification to obtain a Paycheck Protection Program (“PPP”) loan. As discussed in our prior articles (The Paycheck Protection Program Loans May Offer Relief to Small Businesses As Part of the CARES Act and Updates to [and Re-Funding of] the Paycheck Protection Program), borrowers on their PPP applications are required to certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”
On Wednesday, SBA stated 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 in good faith. SBA, in consultation with the Department of Treasury, found this limit appropriate because borrowers with loans below $2 million were less likely to have had access to adequate sources of liquidity than borrowers that obtained these larger loans.
This does not mean that borrowers of loans over $2 million did not make a good faith certification. Instead, SBA states that all PPP loans in excess of this threshold will be subject to review for compliance with the program. Should SBA deem a borrower to have lacked an adequate basis for the required certification, it will seek repayment of the outstanding loan balance and inform that borrower the loan is not subject to forgiveness.
As SBA extended the date to repay loan proceeds to meet this safe harbor rule to Monday, May 18, 2020, businesses thinking of repaying received PPP loans should act fast.
Newmeyer Dillion continues to follow COVID-19 and its impact on your business and our communities. Feel free to reach out to us at [email protected] or visit us at www.newmeyerdillion.com/covid-19-multidisciplinary-task-force/.