On May 8, 2020, the U.S. Small Business Administration (“SBA”) posted a ninth Interim Final Rule on Extension of Limited Safe Harbor with Respect to Certification Concerning Need for PPP Loan Request. This Interim Final Rule revises the interim final rule posted on April 24, 2020, by extending the date by which certain Paycheck Protection Program (“PPP”) borrowers may repay their loans from May 7 to May 14, 2020, in order to avail themselves of a safe harbor with respect to a certification required by the Act.
On April 24, 2020, SBA posted on its website an interim final rule (the “Fourth PPP Interim Final Rule”) to provide relief to PPP borrowers who applied for and received PPP loans based on a misunderstanding or misapplication of the required certification standard. The CARES Act requires each applicant applying for a PPP loan to certify “that the uncertainty of current economic conditions makes necessary the loan request to support the ongoing obligations” of the applicant. The Fourth PPP Interim Final Rule provides that any borrower that applied for a PPP loan and repays the loan in full by May 7, 2020, will be deemed by SBA to have made the required certification in good faith.
SBA, in consultation with the Department of the Treasury, will issue additional guidance before May 14, 2020 concerning how SBA will review the required certification to help PPP borrowers evaluate whether they may have misunderstood or misapplied the statutory certification standard. Based on this upcoming guidance, SBA, in consultation with the Department of the Treasury, determined that it is necessary and appropriate to extend the safe harbor deadline for repaying PPP loans from May 7 to May 14, 2020.
As such, the Fourth PPP Interim Final Rule (85 FR 23450, 23451-23452) is now revised to read as follows:
Limited Safe Harbor with Respect to Certification Concerning Need for PPP Loan Request.
Consistent with section 1102 of the CARES Act, the Borrower Application Form requires PPP applicants to certify that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Any borrower that applied for a PPP loan and repays the loan in full by May 14, 2020 will be deemed by SBA to have made the required certification in good faith.
Borrowers were first made aware of this extension on May 5, when FAQ #43 of the Frequently Asked Questions was posted by SBA. It is welcome news to borrowers who were considering whether to repay their PPP loan by May 7. The discussion over whether a PPP loan is really necessary for certain businesses became a nationwide issue last month after public comments by the Treasury Secretary and subsequent guidance was issued by SBA regarding the required certification that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” See SBA FAQ Addresses “Good Faith Certification” by PPP Loan Applicants on our website for additional information. Borrowers should also look forward to forthcoming guidance to be issued by SBA concerning how they will review the “required certification” prior to the new May 14 deadline.
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For additional information on the Paycheck Protection Program, as well as other Federal, state and local relief measures, please visit our COVID-19 Resource Center on our website. If you have any questions, please contact your Tronconi Segarra & Associates advisor or a member of our response team at covid19team@tsacpa.com
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