If your company received less than $2 million in Paycheck Protection Program loans, you will have met the “good faith” requirement concerning your need for the loan.
On May 13, the SBA and the Treasury Department provided new guidance to address borrower and lender questions about the Paycheck Protection Program (PPP), which is part of the CARES Act that became law in March.
The guidance is contained in the 17-page “Frequently Asked Questions” document that you can
view and download here
.
Of particular interest to many small business borrowers is question 46: ”
How will SBA review borrowers’ required good-faith certification concerning the necessity of the loan request?
”
The SBA’s answer: ”
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 has therefore established an explicit “safe harbor” for borrowers whose loans do not exceed the $2 million threshold. The SBA’s reason for this safe harbor is that such borrowers “are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans.”
Moreover, the safe harbor recognizes that, “given the large 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.”
At least for now, there is no safe harbor for companies who received PPP loans of $2 million or more.