This article was updated on May 14, 2020. Updates to this article will be made as new information becomes available
MAY 14, 2020 UPDATE – Important Update on the Paycheck Protection Program under the CARES Act
Since early April, the U.S. Small Business Administration (“SBA”) has published Frequently Asked Questions (“FAQs”) in regards to the implementation of Section 1102 – Paycheck Protection Program (“PPP”) and Section 1106 – Loan Forgiveness under the CARES Act. The following summarizes the key questions addressed since Schneider Downs’ last article on May 7, 2020 regarding the PPP FAQs.
Q: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?
Any borrower that, together with its affiliates, received PPP loans of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith. Additionally, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances.
The SBA will review all PPP loans in excess of $2 million, and other PPP loans as appropriate. If the SBA determines that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan, it will ask the borrower to repay 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 the SBA, the SBA will not pursue administrative enforcement.
Q: An SBA interim final rule posted on May 8, 2020 provided that any borrower who applied for a PPP loan and repays the loan in full by May 14, 2020 will be deemed by SBA to have made the required certification concerning the necessity of the loan request in good faith. Is it possible for a borrower to obtain an extension of the May 14, 2020 repayment date?
Yes, the SBA is extending the repayment date for this safe harbor to May 18, 2020, to give borrowers an opportunity to review and consider the above FAQ. Borrowers do not need to apply for this extension.
If you need more information, please reach out to any of your contacts at Schneider Downs or contact Joel Rosenthal ([email protected]) directly.
