New Guidance for Small Businesses and PPP Loan Forgiveness

On May 13, 2020 the SBA released additional guidance around Payroll Protection Program (“PPP”) Forgiveness. The PPP was extended on on April 24, 2020, by President Trump as part of a $484 billion coronavirus relief package, which included $380 billion towards the PPP portion of the Coronavirus Aid, Relief, and Economic Security Act (“CARES”).

The SBA’s interim rule outlines that an entity applying for a PPP loan must certify that “’[c]urrent economic uncertainty makes this loan request necessary to support [its] ongoing operations.” Treasury has continued to refine the PPP in an effort to assist small businesses that truly have a need. The new guidance clarifies that the SBA will review borrowers’ good-faith certification concerning the necessity of their loan request if the borrower received PPP loans of more than $2 million in principal.  Those loans for less than $2 million “will be deemed to have made the required certification concerning the necessity of the loan in good faith.”  The SBA has provided this safe harbor threshold under the assumption that those borrowers with loans below this threshold are “less likely to have had access to other sources of liquidity in the current economic environment.”

Borrowers with loans greater than $2 million may still have an adequate basis for the good-faith certification depending on their circumstances.  If a borrower would like to return the PPP funds, they have until May 14, 2020 to do so without penalty under the SBA’s safe harbor guidelines.

 If you have previously applied for the PPP or other Coronavirus relief and are wondering what next steps are, see our past newsletters here.