SBA Extends Safe Harbor PPP Loan Repayment Deadline

There has been much confusion and anxiety regarding the Paycheck Protection Program (PPP) loans because of the changing and incomplete guidance provided by the Small Business Administration (SBA) and the related threats of audits and penalties from the Secretary of the Treasury in the media. Some borrowers of PPP loans may want to assess whether to avail themselves of the limited safe harbor provided by the Interim Final Rule on Requirements for Promissory Notes, Authorizations, Affiliation, and Eligibility (originally posted 4/24/2020) ("Interim Rule").

To qualify for the limited safe harbor under the Interim Rule, the borrower must have applied for the PPP loan prior to April 24, 2020 and repay the PPP loan in full by May 14, 2020 (formerly May 7, 2020 prior to the extension in FAQ #43 discussed below). If the borrower qualifies, then the borrower will be deemed to have made the certification that "[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant" in good faith. The concern over whether to keep the PPP loan because of this certification, which was made at the time of the PPP loan application, arose after the SBA issued FAQ #31 on April 23, 2020, which states that "Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business."

On May 5, 2020, the SBA released FAQ #43 that extends the repayment date for the limited safer harbor under the Interim Rule from May 7, 2020 to May 14, 2020. FAQ #43 states that the SBA will promptly revise the Interim Rule to implement this extension. In addition, the SBA stated that "SBA intends to provide additional guidance on how it will review the certification prior to May 14, 2020."

As of time of publishing of this blog on May 6, 2020, the SBA has not revised the Interim Rule. The SBA has also not provided additional guidance at this time on how the SBA will review PPP loans for the certification quoted above after the lender’s submission of the borrower’s loan forgiveness application. The SBA stated such guidance would be forthcoming in FAQ #39.