In its most recent update to the list of frequently asked questions (FAQs), the Small Business Administration (SBA) and Treasury Department extended the safe harbor repayment date for loans under the Paycheck Protection Program (PPP) established by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
The PPP application form requires borrowers to certify that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” In an effort to address this vague requirement, the SBA and Treasury issued guidance on April 23, 2020 specifying that, while the CARES Act suspends the requirement that borrowers be unable to obtain credit elsewhere, applicants must still certify in good faith that their PPP loan request is necessary. Specifically, FAQ 31 directs borrowers to consider current business activity and the ability to access other sources of liquidity.
The guidance initially provided a safe harbor provision that a borrower who applied for a loan prior to April 24, 2020 and repays the loan in full by May 7, 2020 will be deemed to have made the certification in good faith. The update issued on May 5, 2020 extends the repayment date for the safe harbor to May 14, 2020. According to FAQ 43, borrowers are not required to apply for the extension. FAQ 43 also states that the SBA will provide additional guidance on how it will review the certification.
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