Treasury Provides Helpful Guidance on May 14th Repayment Safe Harbor
On May 13th, Treasury updated its Paycheck Protection Program (PPP) Frequently Asked Questions document by adding #46.
As a reminder, in FAQ #31, Treasury had added an unclear requirement requiring that each borrower assess their ability to access other sources of liquidity in relation to their certification for the loan. FAQ #46 provides some clarity for borrowers evaluating whether they needed to repay their loan by the May 14th safe harbor deadline (to avoid any risk of sanction if the SBA concluded somehow there were other adequate sources of liquidity). It states with respect to any PPP loan of less than $2 million the following: “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.”
Importantly for PPP loan borrowers who have received a loan of $2 million or more, it states the following: “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.”
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