Keep It or Return It: Major Update for PPP Loans Under $2 Million

By Gordon W. Prince, Esq.

The SBA has automatically extended the safe harbor Paycheck Protection Program loan repayment deadline to May 18, 2020, in light of the new guidance it has issued regarding the good faith certification all PPP loan recipients were required to make when they applied.

The new guidance, FAQ #46, provides that borrowers who received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification regarding the necessity of the loan in good faith. Thus, these borrowers no longer have to consider returning their loan.

Additionally, the new guidance relieves some of the stress for borrowers who received a PPP loan greater than $2 million and are trying to determine if they should return their loan. The SBA still plans on reviewing all loans greater than $2 million dollars to ensure compliance with the PPP loan program, but appears to have taken a step back from its previous, somewhat threatening, guidance that referenced criminal and/or civil penalties to those borrowers who lacked an adequate basis for the good faith certification.

“If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request.”

For more on PPP safe harbor requirements and how they’ve developed over the past weeks, read Gordon’s article “Keep It or Return It? Appropriate Handling of Government Funding During COVID-19”.