On April 24, 2020, the SBA gave an option to borrowers who applied for a Payroll Protection Program (“PPP”) loan on or before April 23, 2020 – but who were now questioning whether they could make a good faith certification that they needed the loan to support ongoing operations – to return the loan proceeds by May 7, 2020. A PPP loan borrower who repaid the loan in full by May 7, 2020, would be automatically deemed by the SBA to have made the required good faith certifications regarding their need for the PPP loan.
On May 5, 2020, the SBA extended this safe-harbor deadline to return PPP loans from May 7, 2020 to May 14, 2020. The SBA also indicated that it would be issuing additional guidance on how to assess need for certification purposes.
Specifically, in its FAQ document about the PPP loan program, the SBA added question 43. In question 43, the SBA reminds borrowers to review carefully the certification required for PPP loans that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” The SBA further reminds borrowers that if they applied for a PPP loan prior to April 24, 2020 and they repay the loan in full by May 7, 2020, they will be deemed by SBA to have made the required certification in good faith. Then, in response to the question of whether a borrower may get an extension on the May 7, 2020 deadline, the SBA announced that it was automatically extending the deadline to May 14, 2020.
In sum, FAQ 43 advises that:
- The SBA is extending the repayment date for the safe harbor to May 14, 2020.
- Borrowers do not need to apply for this extension.
- The extension will be promptly implemented through a revision to the SBA’s interim final rule providing the safe harbor.
- SBA intends to provide additional guidance on how it will review the certification prior to May 14, 2020.
Borrowers of the PPP loans now have additional time to evaluate whether they can in good faith make the required certification, or if they should repay any PPP loan amounts. Such borrowers should also be watching for the additional guidance the SBA will be releasing about the certification.
