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PPP Safe Harbor for Loans Under $2 Million


CLIENT UPDATE: On May 13, 2020, Treasury updated its FAQ publication to provide a safe harbor for all PPP loan recipients with loans of less than $2 million.

On the PPP loan application, all applicants must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” This somewhat ambiguous language, however, left many PPP loan applicants questioning whether they could make this certification in good faith and whether they might face liability or be prohibited from having their PPP loan be forgiven if the loan was not, in fact, “necessary.”

Fortunately, Treasury updated its Frequently Asked Questions publication to provide a safe harbor for borrowers that received PPP loans under $2 million. This publication provides, in answer to Question 46, that “[a]ny 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.” (Footnote omitted).

The FAQ publication further clarifies that PPP borrowers with loans greater than $2 million can still satisfy the good faith certification requirement, although such will be subject to SBA review and be based on the individual circumstances of the applicant. If the SBA determines that the borrower lacked an adequate basis for the certification, SBA will inform the lender that the borrower is not eligible for forgiveness, and SBA will seek repayment of the loan. However, if the borrower repays the loan following this notice, the SBA will not pursue administrative enforcement or referrals to other agencies.

Please note, however, that the safe harbor discussed above is found only in a FAQ publication and has not been published as an official rule – at least not yet.

The full text of the FAQ publication can be found here:

Wadleigh’s COVID-19 Response Team will continue to monitor this situation closely and provide updates as the situation develops.