The U.S. Small Business Administration issued new guidance yesterday regarding borrowers’ good-faith certification concerning the necessity of their loan request under the Paycheck Protection Program. In so doing, SBA extended the safe harbor for repayment of loans from May 14 to May 18, 2020. Borrowers who repay their loan by that date will be deemed by SBA to have made the required certification, concerning the necessity of the loan, in good faith.

The new guidance, in answer to Frequently Asked Question 46, also states that any borrower that 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 said that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans, and the safe harbor will promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees.

SBA noted that borrowers with loans greater than $2 million may have an adequate basis for making the required good-faith certification based on their individual circumstances. SBA previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements. In the FAQ, the agency noted that if it determines that a borrower lacked an adequate basis for the required certification, 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, the agency will not pursue administrative enforcement or referrals to other agencies with respect to the certification.

ASA will keep members apprised of further developments.