InfoBytes Blog
SBA, Treasury won’t audit PPP loans beneath $2 million
On May 13, the Small Business Administration (SBA) in consultation with the Treasury Department updated the Paycheck Protection Program (PPP) Frequently Asked Questions (FAQs) to provide additional borrower guidance. Borrowers that submit PPP applications must certify, in good faith, that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” FAQ #46 establishes a safe harbor that “[a]ny borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.” According to SBA, this safe harbor is appropriate because borrowers with loans of less than $2 million are generally less likely to have access to other forms of liquidity than borrowers who are able to obtain larger loans. Also, the safe harbor will provide more certainty to PPP borrowers with more limited resources, and it will allow SBA to use its resources efficiently to prioritize reviews of larger loans, where compliance audits may yield higher returns.
SBA’s guidance noted, however, that borrowers with loans greater than the $2 million threshold “may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance.” Those loans will be subject to review by the SBA, and if the SBA determines a borrower lacks an adequate basis for certification, the borrower will not be eligible for loan forgiveness and must pay the outstanding balance. If a borrower repays a loan after receiving notification from the SBA, the SBA states that it will not pursue administrative enforcement or make referrals to other agencies based on its determination concerning the certification of necessity.
Additionally, in FAQ #47, the SBA extended until May 18 the PPP safe harbor repayment deadline for borrowers who received PPP loans but had access to other sources of capital. Borrowers who applied for a PPP loan and repay the loan in full by May 18 will be deemed by the SBA to have made the required certification regarding necessity of the loan request in good faith. The extension is intended to provide borrowers an opportunity to consider FAQ #46. The SBA’s interim final rule providing the safe harbor (covered by InfoBytes here) will be revised to reflect the extension.