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SBA FAQ 46 Provides Safe Harbor for PPP Loans Under $2 Million

MaryPat Davitz

May 13, 2020

Safe Harbor for PPP Loans Under $2 Million

Today, the SBA released FAQ 46 providing a safe harbor for PPP loans less than $2 million. The safe harbor relates to the required good faith certification that “current economic uncertainty makes this loan request necessary to support ongoing operations of the Applicant”. According to FAQ 46, any borrower (together with any affiliates) that received a PPP loan with a principal amount less than $2 million, will automatically be deemed to have made the required certification concerning necessity of the loan in good faith, and will, therefore, not be subject to review by the SBA with regard to the necessity of the loan which might cause the loan to be paid back or result in further enforcement actions.

Enforcement Action Relief for PPP Loans Over $2 Million

Loans above the $2 million threshold remain subject to review by the SBA for compliance with program requirements, including the certification requirement. In the case that the SBA determines a borrower who obtained a PPP loan over the $2 million threshold did not have an adequate basis for making the certification as to necessity of the loan, the SBA will not pursue administrative enforcement or referrals to other agencies if the loan is repaid after the borrower is notified by the SBA.

Background and Summary

Previously the SBA stated that all PPP Loans greater than $2 million and other PPP loans as appropriate, will be subject to review by the SBA for compliance with the program requirements set forth in Interim Final Rules and the application form; including the requirement to make a good faith certification regarding the necessity of the loan. FAQ 31 provided additional information surrounding necessity and allowed borrowers to return PPP loan funds by May 7, 2020 (later extended to May 14, 2020) if they did not meet the requirement to make the certification in good faith. As a result, many small businesses returned PPP loan monies, or have considered doing so to avoid potential repercussions if it was later determined they lacked adequate basis to certify as to necessity for the loan. The SBA in conjunction with the Department of the Treasury provide relief and clarification for small businesses in need of PPP loan funds in accordance with the original intent of the program.   

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