In recent weeks, as revelations surfaced about big businesses receiving loans under the Payroll Protection Program (PPP), the Treasury Secretary announced that the SBA would be conducting reviews of all large borrowers (in excess of $2 million) and selected smaller borrowers. The SBA issued further guidance requiring all borrowers to assess their economic need for the PPP loan and, in particular, the required certification that was made on the PPP loan application which stated “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” The guidance went on to say that borrowers must make the certification in good faith, taking into account their current business activity and ability to access other sources of liquidity.
Yesterday, May 13, 2020, the SBA announced a safe harbor provision will apply to SBA’s review of PPP loans with respect to the issue above. Under the safe harbor provision, 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. The SBA concluded that borrowers with loans below the threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment. The safe harbor also promotes economic certainty as borrowers with more limited resources endeavor to retain and/or rehire employees.
If you have questions regarding this recent development, or if we may assist you in any way, please do not hesitate to contact us.
We wish you continued health and safety.
The Partners of
Russell Thompson Butler & Houston, LLP