Safe Harbor for PPP Loans Under $2 Million

Safe Harbor for PPP Loans Under $2 Million

All PPP borrowers must certify in good faith that “current economic uncertainty makes this loan request necessary to support the ongoing operations.” According to the SBA guidance issued May 13, 2020 “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.” In summary, PPP loans under $2 million meet the certification requirement under this safe harbor.

“SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees.”

“In addition, 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. Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance.”

The SBA issued Q&A #46 on May 13, 2020 detailing safe harbor for PPP Loans under $2 million. See the full answer to Q&A #46 here.

PPP Loan Forgiveness – Waiting for Guidance

The SBA has not yet issued Final Rules on Loan Forgiveness. We are expecting to see something soon, but until then we are making assumptions based on limited information. As soon as we get the rules, we will send an e-mail to clients and post the information to our News page.