COVID-19 Resources & Information

As the news about COVID-19 continues to evolve,
our team at H&CO will stay focused on answering
your most pressing questions.

The SBA Provides Safe Habor for PPP Loans under $2 Million

On May 13, 2020, the U.S. Small Business Administration provided an update to the PPP Frequently Asked Questions with the inclusion of Question 46: How will SBA review borrowers' required good-faith certification concerning the necessity of their loan request? 

The complete answer is below, but in summary it states that businesses that together with their affiliates accepted Paycheck Protection Program (PPP) funds of less than $2 million will be assumed to have performed the required certification concerning the necessity of their loan requests in good faith.

Borrowers with loans of more than $2 million may still have an adequate basis for making the required good-faith certification, based on their individual circumstances and the language of the certification and SBA guidance. 

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.

H&CO has created a customized advisory service aimed at helping clients maximize their PPP loan forgiveness and meet compliance requirements set by the SBA.  Our team will work with you to help expedite the loan forgiveness process and provide a reliable and trusted source of information for your PPP lender and SBA. Please visit our PPP loan forgiveness claim consulting page or click here to request a quote.

Complete Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any 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.

SBA has determined 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. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given thelarge volume of PPP loans, this approach will enable SBA to conserve its finite audit
resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.

Importantly, 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 in light of the language of the certification and SBA guidance. SBA has 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 set forth in the PPP Interim Final Rules and in the Borrower Application Form. 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. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.

If you have any questions, please contact:

Nicole K. Cunningham 
Partner | Client Relations
cunningham@hcoadvisors.com